|CPDS Home Contact||Summary Appalling Queensland Governments|
This paper is a detailed version of a submission [see Covering letter and Summary Submission] to the panel established by the Queensland Labor Party to identify and eliminate the causes of the Queensland Government's electoral setback in 1995.
Various reasons have been publicly suggested for the election result.
[In 2005 it it was revealed that privately "large sections of the ALP (had blamed) Dr Death for Labor's poor state election performance" (King M., 'Rudd learns to duck', Courier Mail, 25/1/05)].
This submission suggests that all these explanations are correct, but that all had an underlying cause which was a lack of substance behind the policies and claimed performance of Government. Such an underlying cause is clearly not generally seen to exist:
Unfortunately the media and other analysts (who influence public opinion) lack means to assess the substance of governments which speak the rhetoric of trendy reforms. Such analysts consider only the stated goals, not whether the means being used to achieve them can be effective (which is increasingly difficult). The resulting inability to really judge Government performance threatens the ability of the democratic system to guarantee good government. It is also a strong justification for insisting on real competence in public service.
Themes of this paper are as follows:
2. WHAT HAPPENED TO QUEENSLAND'S PUBLIC SECTOR?
Seventy percent of its employees voted against the Government in 1995. This caused public sector reform to be partly blamed for the electoral outcome. The change process has also been defended:
However the reaction which public sector employees expressed electorally in 1995 does not primarily relate to `individual fears about job security, which had been reduced as an unavoidable consequences of essential reforms'. Rather it was the outcome of a marked decline in the relevance and effectiveness of their working environment (of which job security is only a part).
The problem with the `reform' process was not just that it was `introduced too quickly and with complete disregard for the human cost' (Koch op cit), but rather that it did not effectively achieve its goals of creating a modern and effective public sector. In fact, the process created a public sector some of which now has limited ability to achieve very much at all (See comments in Attachment A).
Furthermore the general public's electoral reaction does not reflect an inability to communicate Government's policies or accomplishments. Rather it resulted from deteriorating services, fumbled infrastructure planning, the absence of anything visibly happening in spite of a lot of talk, and general `angst' (eg about whether Australia can have more than `5 minutes of economic sunshine').
The style of `reform' used after 1989 had the unexpected and undesirable side effect of seriously eroding the base of knowledge and experience in the public service, as will be further considered in Sections 4. Direct observation of many cases, and numerous anecdotes show that merit was sometimes (often?) a secondary factor in senior public service appointments, despite rhetoric about merit (and despite possible good intentions).
can be identified which invalidates any claims that senior public service appointments were necessarily based on merit. Details could be provided on request.
However, de-skilling was not solely a result of the re-structuring and restaffing process, but also of the introduction of a variety of mechanisms (eg large ministerial staffs) designed to strengthen political control, as outlined in Section 5. Such steps were counter-productive to the effectiveness of government as a whole (see Section 6).
3. DE-SKILLING WAS NOTICED LAST BY ADVISERS AND SOME MEDIA
There is a large difference between the `rhetoric' about trendy policy ideas which appears in the press, and the substantive knowledge of existing practices, related functions, technical requirements, staff capabilities, past reform efforts, and alternative options which are required to express competent policy or to put this into practice. Neither the political process, nor the persons with superficial knowledge and little experience who were allowed to control restructuring and senior level restaffing, could tell this difference. Experienced staff could immediately see the problem (impractical amateurism) but in the enthusiasm for `reform' no one was interested in the views of those who were being `reformed'. Staff at grass roots level soon detected the resulting absence of substantive skill in senior / middle management. And this significantly increased their discontent.
De-skilling led to an inability to judge the relevance and wisdom of `fashionable' policy ideas. For example, in the pursuit of economic goals, commercialisation of government services has been applied indiscriminately. This has adversely affected some public and social goods (eg government functions undertaken in regional areas, because economic or social value had been judged to exceed costs, and no effective market mechanism exists). The latter allowed the general public in 1992 to glimpse problems which had been apparent to experienced public servants in 1990.
The consequences of ignoring the need for real knowledge and skills are now, in 1995, becoming increasingly obvious to the public (noting emerging concerns about functions such as health, education and public works).
`When senior positions are occupied by inexperienced people who do not know the details of their functions, or whose policy knowledge is limited to trendy rhetoric, the normal rate of errors in dealing with new issues is compounded. Without a memory of the pitfalls `obvious' steps will be repeated and produce failures which real knowledge and experience could have anticipated.... Political popularity responds too slowly to invisible public sector changes to be a good criteria for public service reform' (From submission to MLAs, 5 May 1993).
Public awareness of the problem has been slowed because of the high level of political influence over Queensland's media which was identified by the Electoral and Administrative Review Commission (Report on Review of Government Media and Information Services, April 1993). Media relations were said to be managed primarily with political criteria in mind. This implies information was biased towards putting the desired `spin' on a story, rather than towards presenting facts.
Awareness was further impeded by academic analyses of the `text book' reform process, which typically put a favourable interpretation on the effect of putting current theories into practice (though as Attachment A shows this was not universal). Few seemed to realise that the only effective way to implement a good theory is to ask those with practical experience how to do it (because any theory over-simplifies reality). Also only 1 in 20 `good ideas' are both feasible and beneficial.
`It's much simpler than that' was a common response in 1990 from staff in the Premier's Office when public servants tried to point out conclusions based on their knowledge and experience.
As ministers relied for information on political advisers, media reports, interest groups currying favours, and a compliant public service, the Government had little indication that anything was really wrong before the 1995 election.
However, the current PSMC Chairman's claim that reforms are `in the past and completed' (Koch, op cit) are optimistic. The deterioration in ordinary administration which resulted in the 1995 electoral result will not be corrected without remedial action requiring much greater skills than those displayed in recent years.
Furthermore de-skilling was not limited to operational public services, but also adversely affected high level functions such as:
Despite effort devoted to policy development and co-ordination, government's capabilities remain ineffective. For example, getting the policy process right was emphasised initially (Davis G. `Executive and Policy Coordination', in Stevens B. and Wanna J. The Goss Government: Promise and Performance of Labor in Queensland, Centre for Australian Public Sector Management, 1993). Because of the lack of concern for the substance of policy, this degenerated into an exercise in paper shuffling, and also contributed to loss of people who had the ability to deal with real issues. Program management was introduced to ensure that budget bids were related to strategic issues facing departments. However, it seems to be a formality without real concern for the necessity, adequacy or effectiveness of programs (See supporting document, The Paper Government: A Review of Queensland's 1994 State Budget). Politically driven, and public sector centred methods for regional planning were devised (eg through SEQ 2001) without considering their administrative feasibility, thus increasing `red tape' on investments in the region (See Craig J., `SEQ 2001: A Plan for an Under-developed Economy', Pacific Basin Studies Review, V5, N1, 1994). The Office of Cabinet was established on the basis of various assumptions (Rudd K. `Problems of Policy Coordination: The Role of Queensland's Office of Cabinet', in Davis G. (ed) Public Sector Reform under the First Goss Government: A Documentary Sourcebook RIPAA (Qld) and Centre for Australian Public Sector Management). Those assumptions appear dubious (ie that the objective of policy is to make government predictable (rigid rather than flexible?); that co-ordination is best combined with Cabinet procedures (which is unnecessary, and may have reinforced the view that process was more important than policy substance); policy development should be separate from implementation (which produces unrealistic policy); and that central management of government is a paper process (setting goals, assessing results) rather than a people process).
Whilst high level deskilling can only be easily recognised by those with advanced knowledge and skills, its effect and costs will be very large in future.
Prior to `reform' Queensland's administration had first rate practical capability, and (with exceptions) only short term pragmatic policy capability. After reform the capabilities in both respects seem second rate (again with exceptions), and to be poorly connected, because reform policies often had no practicality (though they may have seemed to be good ideas).
Section 8 suggests methods to overcome such defects, and that attempts to respond positively to public expectations without such fundamental re-development at the same time could be devastating.
4. WHY DID DE-SKILLING OCCUR?
Public sector reform was a priority after 1989 nominally to: introduce modern administrative methods; implement the `Fitzgerald' agenda; and contribute to improved economic performance (by better administration, simplifying regulation, and catalysing needed economic changes).
However, the best goals can prove disastrous, in the absence of good means for implementing them. Change was driven `top down' by the clumsy method of `across the board' restructuring and restaffing, without realistic means to ensure that the changes being made were for the better.
The issues which government deals with are very complex. It was thus impossible to always recognise real requirements, as the political system only contains part of the knowledge on which the effectiveness of government relies. Furthermore, reviews of agencies by the PSMC were often only superficial, but were used as the basis for change without allowing their conclusions to be questioned. It is not only human values which require that those involved be consulted, but the impossibility of `getting it right' if they are not fully involved and committed.
Effective corporate renewal starts at the bottom through informal efforts to solve business problems. The view that change should begin at the top leads to reviews of organisation goals and cultures, producing new mission statements, engagement of professional human resource managers, organisation wide programs to push change (eg new organisation structures), performance appraisal systems, training programs to turn managers into change agents. Such methods are entirely ineffective. (Beer M., Eisenstat R and Spector B., `Why Change Programs Don't produce Change', Harvard Business Review, November - December, 1990)
`Queensland's public sector 'reform' essentially ignored all past knowledge and experience within the public service. The comprehensive process of restructuring and restaffing thus amounted to building 'castles in the air'. The result is that:
Such problems could have been substantially avoided. Potential difficulties and better options had been suggested in a May 1990 discussion of Changing the Queensland Public Sector (an outline of which is given in Attachment B). In the past, experience had shown that change was most successful when it built on existing knowledge and skills. This paper was circulated but never really discussed, as overcoming bureaucratic `resistance' to change was seen as the main problem, and no value was placed on existing public sector knowledge or skills.
Very similar methods for public sector reform had been used by Victoria's Cain Government in the 1980s, and reportedly produced severe difficulties (Attachment C). Yet apparently the only conclusion drawn from Victoria's experience was the need to avoid extravagant public spending.
5. THE PUBLIC SERVICE SHOULD HAVE BEEN THE SOLUTION, NOT THE PROBLEM
De-skilling was not solely the fault of those staff directly involved in the restructuring and restaffing process (who were just `following orders'). The real problem lay in the undeclared decision to over-ride the protection of the Westminster tradition of a permanent professional public service in the hope of a `quick fix' to the public sector, as it was seen as the main problem.
This view was entirely inappropriate, as the public sector had been through extensive reforms during the 1980s with similar goals to those introduced in 1989. Many of the goals which the reform agenda addressed were widely accepted by the public sector. All that would have been required was to encourage the public sector to see itself as `the solution'.
However, in practice the public sector was seen as the `problem', and this inevitably led to staffing biased towards political compliance (ie towards selecting those who are agreeable, or comply because they have insufficient knowledge or strength to express an informed opinion).
Politicisation had been seen as undesirable by the Fitzgerald Commission, who had warned about consequences such as: ignoring merit; political contacts rather than professional ability being sought by ambitious staff; poor quality advice; bad government decisions; failure to disclose problems; and official misconduct (Report of a Commission of Inquiry Pursuant to Orders in Council, 1987-89).
Merit in public sector employment had been endorsed in Labor policies prior to the 1989 election, and was consistently stated to be the Government's goal.
High Ideals: 'To ensure their independence it is essential that public servants belong to an established career structure. Their opportunities for appointment and promotion must be based on merit, not on the acceptability or otherwise of the advice they provide Ministers'. (From Return to Westminster: Public Service Reform under a Goss Government).
Despite this a high level of political responsiveness was probably seen to be desirable for several reasons. Firstly an apparent inability of bureaucracy to respond to the rapidly increasing demands on governments (especially social and environmental expectations) was first expressed in the 1970s. Secondly, a need to strengthen the economy emerged in the 1980s (and in Queensland in the 1990s this was seen to need a `market' approach, low taxes and more efficient services). Finally, there was an apparent lack of trust of the public service based on the view that it was already politicised.
: There had been one view that the Public sector had been highly politicised before 1989:
Politicisation can be considered to occur either: (a) when public servants are appointed to senior positions preferentially because of their support for the Government of the day or (b) when public servants do not fulfil their role as a source of competent independent policy advice (either because of unquestioning compliance, or because they are not allowed to provide such advice). In Queensland in the 1980s mismanagement had grown as the public sector became increasingly seen as a political instrument but the incidence of type (a) politicisation was very small. Far greater type (a) politicisation had emerged elsewhere because of arguments about the need to increase political responsiveness.
(Paraphrase from `Politicisation of the Public Service: Some Objections', discussion paper by the author, July 1990 submitted to Premier's Department corporate planning workshop).
In the 1980s, the public service had become less able or less willing to present independent advice about the increasingly difficult problems which existed, because it was not organised to provide such advice, and it lacked means to manage effective change (for reasons outlined in Attachment B). In the late 1980s, National Party governments encouraged increased political compliance by the introduction of a contract system for senior public servants because of the (erroneous) view that the lack of public sector efficiency / responsiveness was the main cause of problems being experienced. However the extent of overt politicisation was still very low.
Political responsiveness had been emphasised nationally since the early 1980s (and increased by measures such as: staff contracts; recruitment of outsiders; and interchanges between public services and ministerial offices). The perceived abdication of responsibility to public service `mandarins' was described as a major source of Australia's problems by present the Prime Minister. There is often an expectation now that public services will respond to the government of the day (rather than to the `public interest', which is seen as only able to be defined politically). All the independence now expected of a public service is that: it be well informed; provide comprehensive analyses; provide continuity of knowledge; and know of the diversity of opinion on any subject (Tingle L. `The Fall of the Mandarins', Weekend Australian, 29-30 July, 1995, and two subsequent articles).
As noted in Attachment C, Wilenski's assumptions about administrative reform have been widely adopted throughout Australia. He assumed that the main problems are to increase the political responsiveness of public organisations and to overcome bureaucratic resistance to change (Wilenski P. `The Battle for Reform', 1979; and Broad L. `Reform Strategies for the 1980s', GO, March 1986)
apparently derived his proposals from the Royal Commission on Australian Government Administration which from 1974 to 1976 had considered the policy implementation difficulties faced by the Whitlam Government. He influenced the methods of reform used by NSW in 1977 and the Commonwealth in 1983. This also had a major impact on the reform style in Victoria in 1980s, and Queensland after 1989.
However accepting Wilenski's assumption (that the problem is to overcome bureaucratic resistance to change) shifted the focus from achieving real goals, onto changing the public sector as an end in itself. Thus it was difficult (impossible?) to realistically know what capabilities to seek through reform, and resulted in organisations which subsequently struggled to work out what to do and how to do it. Furthermore, this approach favoured `successful' managers who comply with superiors wishes, but may have only superficial knowledge of the functions of agencies and little experience.
`What do successful managers - those who have been promoted relatively quickly - have in common with effective managers - those who have satisfied, committed subordinates and high performing units? Surprisingly the answer seem to be that they have little in common. ...... although managers who are successful (that is rapidly promoted) may be astute politicians, they are not necessarily effective. In fact the so called effective managers may be the ones who do not in fact take care of people and get high performance from their units. ...... instead of looking for sophisticated technical or governmental approaches to the performance of organisations, the solution may be as simple as promoting effective managers.' (Luthans F., `Successful vs Effective Real managers', Academy of Management, EXECUTIVE, V8, N2, 1988, pp127-132)
`Successful managers' may not recognise required skills, or may feel threatened by those with deeper knowledge or skills (and thus eliminate them inadvertently, or deliberately). Thus simply seeing the public sector as the problem was sufficient to bias staffing towards compliance (rather than actively providing independent advice) whose effects are identical to overt politicisation.
Wilenski's approach allowed `successful' managers to wreak havoc in the name of desired changes, whilst increased staff mobility allowed them move on before the consequences become obvious.
Such effects of administrative `reform' are worrying considering the importance of knowledge and skill and of accelerated organisational learning to Australia's economic performance. And the assumption that the public service was the main problem proved self fulfilling. However, as will be argued in Section 8, this problem probably has no purely political solution.
6. COMPETENCE IS MORE USEFUL TO GOOD GOVERNMENT THAN COMPLIANCE
This section will show that the assumptions which favoured increased political compliance were false. Firstly an absence of responsiveness is not the major obstacle to policy implementation. Secondly, political compliance reduces (rather than increases) the public sector's ability to respond to community expectations, and thirdly it reduces the quality of administration.
Firstly, a lack of bureaucratic responsiveness is not the major reason for the failure of social policies, as Wilenski had assumed. The increased expectations of government which arose in the 1970s (eg social action programs) were an extension of the postwar success which governments were seen to have achieved in economic management, and a reflection of confidence in new policy tools such as systems analysis. However, such efforts experienced the same difficulties elsewhere as they did in Australia (eg in the USA where senior officials are often directly appointed politically). Broader reasons for failure in policy implementation exist, than a lack of compliance by the public sector.
The problem could be the impossibility of managing a complex of overlapping programs (See Pressman J. and Wildavsky A., `Implementation: How Great Expectations in Washington are Dashed in Oakland', University of California Press, 1973), or the non-linear behaviour of complex social systems which can make it impossible to understand how causes relate to their effects (See Forrester J., Urban Dynamics, MIT Press, 1969)
The fixation of Australian reformers on increasing bureaucratic compliance is a narrow view (which avoided the need to deal with `real world' obstacles to policy implementation, and reflects a lack of cross-disciplinary co-operation). A competent public service is more likely to overcome real obstacles to policy failure (whereas the compliant are likely to be ignorant of them).
Secondly political compliance may not make government more responsive to the community. Despite six years of `reform' to increase political compliance in Queensland, an observer recently suggested that the bureaucracy is cynically manipulating the Government's agenda in ways having nothing to do with community interests (Kolsen T. `Inexpensive Tasks Keep the Ants Happy', Business Queensland, 7/8/95). The reason that governments seem remote and unresponsive is that (in a changing world) a lack of `reality' responsiveness is an inevitable result of a high level of `political' responsiveness.
: Attachment D records observations of economic reform efforts by successive governments in Queensland over the past decade. It suggests that the perceived quality of public administration will continue to decline as long as administrative change is politically oriented (ie compliant rather than competent people will tend to emerge in key positions, and the bureaucracy will still be seen as `the problem'). This allegory also illustrates how the structure of a complex system can cause well intended `rational' action to have self defeating outcomes, and how enforced political accountability can slow a government's rate of learning about changing requirements.
Queensland's community often blames public servants for administrative failings and encourages ministers to exert strong control - thus inadvertently creating the problems to which they object.
Thirdly competence rather than compliance can make government more effective, for reasons which go beyond those suggested under the Fitzgerald Commission's `legalistic' view of government. Some observations in Attachment E show the advantage of competence over compliance in terms of:
It was recently suggested that the public service needs to be solely politically compliant because of the need to make `tough' decisions, such as cutting back government spending (Dodson L. `Taking the Public out of the Service', Financial Review, 31/7/95). This is questionable, as:
Thus for many reasons a capable public service is more likely to contribute to a desirable future, than one which is politically compliant. The democratic political process is only part of our system of government. Government as a whole can be more effective and responsive if the political process does not seek to impose unilateral control.
7. ECONOMIC CHALLENGES HAVE NO PURELY POLITICAL SOLUTION
Economic considerations have strongly influenced Queensland's public sector reforms (and in the process distorted some functions which involve social and public goods as noted in Section 3).
Reflecting a `pro-market' economic approach, it was assumed that government's best economic contribution would be to concentrate on its `core business', which was further assumed to involve more efficient and effective service delivery (whilst maintaining a strong fiscal position, and relatively low taxes). However this approach is not doing Queensland's economy much real good.
The first problem is that the things which are being done (low taxes, some `assistance' to firms, commercialisation of government services) are not economically significant.
(a) low taxes have only a second order effect on the location of desirable industries.
(b) direct government `assistance' to firms will be much less effective than upgrading the ability of business and the community to provide such support. Such `assistance' is the opposite of economic development.
(c) commercialisation of services, even those where market mechanisms can exist, can never have more than very limited economic impact. The view that government is just a large business and can be much more efficient by applying commercial principles is naive. It reflects no understanding of the effect which political pressures (which governments are set up to respond to) have in eroding scope for customer responsiveness (see Attachment F).
These matters are discussed in detail in a supporting document (More of the Same, June 1995).
Furthermore such efforts have been inhibited by public service de-skilling, and have the effect of biasing public sector skills away from those really required for `good government'.
`While the technological intelligentsia is resistant to traditional forms of bureaucratic authority and open to rational debate, its members .. are likely to be illiterate in the knowledge and skills required to make judgements about the substantive purposes of public administration and service. Worse they are likely to have a trained indifference towards what they dismiss a `philosophical', academic or abstract questions. (Yeatman A., `The Concept of Public Management and the Australian State in the 1990s', Australian Journal of Public Administration, V46, N4, 1987).
The second problem is that the things which need to be done to develop the economy as a whole are not being done. Australia's real economic problem is a lack of productive capability in the community itself. But focusing on government's own services and activities does not lead to concern for the effectiveness of other institutions and mechanisms within society (which comes into the ambit of government's real `core business', governing). In fact Queensland's Government often competes with, rather than complements, the community (eg through its financial business operations).
It has been assumed that nothing significant can be done (eg via industry policy) to enhance the economy's performance, and that a relatively `free market' approach (eg deregulation and a `hands off' approach by government) is the best that can be achieved.
However a `free' market does not automatically produce desirable outcomes. Market failures still exist, and the rate of economic development is slow (eg because of the `chicken and egg' problem of creating the components of a mutually dependent cluster of enterprises in an industry).
The reasons there is now a need for mechanisms to develop the economy as a whole are complex, and are considered outline in Attachment G. This also suggests why politically accountable bodies can not take such roles.
(ie increasing the ability of business and the community to initiate and support high productivity enterprises) involves an economy `learning' (or re-organising itself) in response to emerging opportunities and threats. The effectiveness of economy wide networks and processes is as important to overall economic capability as is the effectiveness of enterprises.
Australia faces a serious economic predicament (declining relative incomes, current account problems which threaten repeated `recessions we have to have') because it has not dealt with this challenge (See supporting document, A better Way of Sustaining Growth, June 1995).
And, despite Queensland's growth, the state has a poorly developed economy. Queensland's growth occurs due to interstate migration and the expansion of low value added sectors (such as tourism). This does not maximise community prosperity (in terms of wages, business profits, a deep tax base, and sustainable rapid growth) or ensure long term security.
The weakness of debate about economic issues prior to the 1995 election reflects:
(a) misleading official data about Queensland's economic performance which ignores: per capita growth comparisons; comparisons with leading economies; the economy's productive capabilities and level of development; and the state's (probable) contribution to Australia's current account deficit (See The Paper Government, Section 4).
Thus there was little good `raw material' for anyone to debate.
However just leaving Queensland's under-developed market economy to its own devices, whilst concentrating on public services and a strong Government fiscal position, is not enough.
Serious efforts to increase the ability of business and the community to initiate and support high productivity enterprises and industries are vitally important to:
`Recessions we have to have' and declining relative income will remain a risk until this is addressed.
8. TOWARDS GOOD GOVERNMENT
There is a risk, if present practices are continued, of a further weakening in basic administration. And the problem is not easy to solve politically, because effective outcomes from political decisions require a competent public service, and because political interventions have caused the problem.
Some observers have equated Queensland's current political situation with that in South Australia in 1989 (Mitchell S., `Mean, Lean and Hounded', Australian, 26/7/95). Subsequent events included backing for financial adventures by the State Bank of South Australia. Thus a decision now to become pro-active could make Queensland's situation much worse.
A decision to become more responsive is also risky as shown by Victoria's experiences in the 1980s (See Attachment C). After public sector `reform' like that in Queensland in the 1990s (and the pursuit of appropriate economic goals by poor methods), the second Cain government experienced administrative failures, and large losses. The third state Labor administration was reported to have tried to solve its problems by constant fiddling with administrative structures and staffing, which inevitably made the situation even worse. And in an endeavour to regain popularity, widespread consultations were also held with interest groups (who would not know how to fix the real problem) which led to expanded ineffective spending. Queensland seems to be on a similar path.
No matter how desirable it may be to respond to community expectations, it could be dangerous to do so without simultaneous fundamental redevelopment of the competence of the public sector.
A number of steps which could assist are speculated in Attachment H. The general goals are: to make agencies more `reality responsive' rather than politically responsive; and to focus on developing people rather than paper shuffling.
Of particular importance is that politically determined structural changes not be seen as real solutions (eg re-organising, eliminating individuals) because there is far more to establishing a desired function than saying `Let it be'. For example, one reform option which might be considered would be to reduce controls through central agencies, and emphasise a consultative and co-operative central government approach. This can not be achieved just by asking for it.
All other things being equal, steps like those suggested in Attachment H should allow a competent system of administration to re-emerge within a decade.
Unfortunately it is most unlikely that `all other things will be equal'. There is a real possibility of an economic crisis (eg because of Australia's failure to develop its economy fast enough to ensure sufficient productivity and competitiveness to reverse the current account deficit). Macro-economic solutions proposed to the current account problem can not be sufficient on their own (See supporting document, A Better Way of Sustaining Growth, Section 8.5).
Australia is not far from the point where large cuts in national spending (including Commonwealth payments to the states) could be enforced by an inability to gain sufficient foreign investment on attractive terms. An economic crisis could become a crisis of the political system also, if government administration is ineffective (leading to a real `banana republic'). Thus support for serious apolitical efforts to develop Queensland's economy is required as well as administrative re-development.
It appears to be time to `take a cold shower', and take the job seriously. However it is not only politicians who need to be more effective. So also do: media (in understanding what is required for good government); bureaucracies (in becoming competent, and a viable source of independent advice); and apolitical community leaders (in leading practical economic development).
J. D. Craig
|Attachment A: Some Comments on the Public Sector and on Reform||
ATTACHMENT A: SOME COMMENT ON THE PUBLIC SECTOR AND ON REFORM
Some published comments on Queensland's public sector are outlined below.
`Consultants ... (said) there were shortcomings in how public servants administered consultancies, their knowledge of what they were administering and the records they kept. ... Mr Peter Forster ... said redundancy schemes had rid the Government of its best and most confident staff' (Fagan D., 'Brain Drain led to Consultancy Blow-out', Australian, 30/11/93, p4).
`Undoubtedly everyone has heard of, if not seen the Mexican wave. Nowadays in Queensland we have the Mexican shrug. It is no longer a matter of putting things off until tomorrow. Anything complicated or requiring a decision is simply put off. Our 'Mexicans' shrug their shoulders and hope all problems will disappear' (Anon, Public Sector Voice, Nov 1993).
`... the main complaint is the perceived bumbling decision making processes of the state government, which results in costly compromises, very slow decisions, or a lack of decisions. This is seen to be fed by the bureaucracy which is not regarded as being of the same calibre as the public servants who held sway during the National Party years' (Coombes P., `A House on Easy Street', ABM, Sept 1994).
An academic study suggested that `whistleblowers' trying to expose problems were being attacked and harassed (King M., `Whistleblowers accuse Goss Public Service', Australian 31/3/94).
`A former senior Goss Government bureaucrat .. slammed the politicisation of the State's Public service and claimed some of its efficiency reforms were farcical'. (Emerson S., `Former Bureaucrat Slams Goss Reforms', Australian, 22/3/95, quoting Roger Scott ex Director General of Education).
Published comments concerning the `reform' process are outlined below.
Reform was conducted without benefit of: any vision of what the public service should be; any guiding philosophy behind the reform process; any blueprint for reform other than 1989 Labor policy; or any strategy for the process of reform. No data was made publicly available as reviews were secret. Anecdotes suggest widespread concern with: lack of philosophy and methodology for reviews; young or inexperienced staff in review teams; and PSMC's propensity to lose senior staff. There was considerable concern about; politicisation; 'mexicans'; staff members who never made it to the short list for their own jobs, because of perception of inability to adapt to the new ethos or perceived disloyalty; downgrading of professionalism; loss of institutional memory; heartless process without concern for people; and loss of CEO autonomy. Outcomes include policy fragmentation in respect of economic issues; and the most complex machinery of government in the Westminster world (some key points from Wiltshire K., 'Reform of the Bureaucracy: An Assessment' Ch 21 in Hede A., Prasser S., Nylan M. Keeping them Honest: Democratic Reform in Queensland, University of Qld Press, 1992).
`The Government had failed to establish goals for departmental reforms, and the regionalisation program had simply created a middle layer of bureaucrats at the expense of services' (quoting SPSFQ officials in McKinnon M., `Women's Touch in Union Marriage', Sunday Mail, 30/1/94)
'The experience, knowledge, talent and indeed the very consciousness of officers has been brushed aside as unimportant in new wave management's lemming like rush to change everything and anything to enhance self promotion' (Anon, Public Sector Voice, Nov 1993, p12).
Prior to 1989, Queensland had none of the traditional signs of widespread corruption, and productivity was high. The administration was a closed shop rather than subjected to political manipulation. Reform may have been less about correcting problems, than about putting in a political `fix' (Prasser S., `The Need for Reform in Queensland - So What was the Problem?', in Hede A., Prasser S., and Nylan N. Keeping Them Honest: Democratic Reform in Queensland, University of Queensland Press, 1992).
Anecdotes Concerning Public Sector (which have not been verified because of lack of resources, but which are typical of those circulating)
An internal observer described policy development in a major department as follows:
There is now a constant oscillation between de-centralising policy (to make it responsive) and re-centralising it (because of concern about the outcomes of decentralisation). As a result there is no scope for a long term approach.
Cabinet submissions must be in a specific form which makes it very difficult for departments to communicate what they really mean. Procedures for approval of submissions are so complex that staff do not bother, and give priority to work which does not require Cabinet approval.
All middle managers in one major department are seen as incapable of performing their jobs, or of being trained to do so.
Staff recruitment has been biased towards cloning a particular style of individual. The bias is towards those with a 1970s confrontationist industrial relations approach. They are incapable of networking or integrating different viewpoints. A key central agency consists of numerous separate offices constantly feuding with one another.
In the same agency, positions appear to have been allocated on the basis of factional deals in return for past support.
The public believes that it can not now easily make direct contact with Government or with the public service.
A well qualified senior official appears to be `nuts', and no one knows what to do.
One senior official is clearly incapable of performing their job. Whenever anything is said by subordinates, those who do so are reported for `diminished work performance' (which threatens the subordinate's career).
50% of the human resource management staff in a major department are on stress leave, through being expected to deal with unmanageable problems.
There is massive uncertainty about Government in the community. People want Government to say what it is doing. It can not do so, because it does not know, or have the capacity to know.
ATTACHMENT B: OUTLINE OF CHANGING
THE QUEENSLAND PUBLIC SECTOR
The Evolving Role of Government: Increased complexity led to pressure for changes in public administration in the 1970s. This was compounded in the 1980s by the need for increased economic effectiveness, and concern about government's impact on this. However government's economic impact was often seen merely in terms of its role as a provider of goods and services, and the profound implications of East Asian economic success were not well recognised. Resolving Australia's economic challenges requires change primarily within the community itself towards more effective productive capability (needing leadership perhaps by government, rather than just more efficient government services).
Context for Change in Queensland: Government policies envisage the need for public sector reform (eg because of Fitzgerald Commission conclusions), and that such reform (to improve efficiency, simplify regulation, and catalyse needed change) would be government's best economic contribution. However the economic challenge is very great because of Queensland's low level of economic development, the lack of general understanding of the nature of a developed economy, and the lack of required cultural awareness to achieve a productive interface with successful economies in East Asia.
Change Strategies Elsewhere: Reform is universally agreed to be difficult and to frequently experience failure in implementation. Wilenski's theory, that the problem is to overcome bureaucratic resistance to change, has been widely put into practice. However difficulties have emerged elsewhere as a result of such approaches.
Assessment of Experience: The assumption that the public sector is the problem rather than the means to achieve a solution to broader problems within society has led to politicisation and managerialism which has reduced scope for overall (ie society wide) solutions emerging. Change should not be separated from ongoing operations. Such separation would make it impossible to take operational requirements into account; create organisations incapable of ongoing change; and reduce staff commitment.
Past Change in Queensland: Despite the absence of major reviews, reasonably effective means for managing change had existed in the 1970s (eg through the Coordinator General's role in arranging coordinated responses to strategic issues). These declined in effectiveness in the 1980s as the Coordinator General's role was changed to ensuring support for major investors. Increasing weaknesses in the public sector and social / economic problems in the late 1980s then resulted in more heavy handed politically driven change, which compounded the problem. There is massive energy for credible change in the public sector [ie in 1989], but also a risk of desertions if effective methods are not used soon.
PSMC Approach: PSMC says it intends to conduct reviews over two years in co-operation with agencies.
An Effective Process: Useful steps would include: allowing grass roots support for reviews to emerge; introducing new information to reviews to provide a sense of direction; focus on functions of agencies, not on their structure and capabilities; and demand real performance.
A number of practical issues were also discussed.
|Attachment C: Comparison with Victoria's 1980s' Experiences||
ATTACHMENT C: COMPARISON WITH
VICTORIA'S 1980s' EXPERIENCES
The authors studied the Cain Government's reforms in Victoria after 1982 to explain why these were followed by serious problems. Their analysis is based on a more conventional public service attitude than was dominant in the 1980s. The Fall of the House of Cain (available from Spectrum Publications, Melbourne) is well worth reading as indicating the long term consequences of a particular way of achieving popular and desirable reforms.
There are parallels with Queensland's 1990s methods for Public Sector change. There was the same: managerial emphasis on government being a business; ill informed belief that the existing system was heavily politicised; and ignoring of prior reforms. The result in both cases was a decline in the substantive understanding by senior administrators about areas they were supposed to administer, and thus an emphasis on 'paper shuffling'. Furthermore, the emphasis on compliance with, rather than counterbalance of, political policies turned the senior public service from the conscience of politicians into their unthinking accomplices. In Victoria those methods led to major problems.
Queensland will not suffer in the 1990s the same financial consequences as Victoria did, because Queensland did not eliminate its 'beancounters' or divert its sinking funds to boost expenditure. But the initiative which was vital to improved economic performance was disabled. The most probable outcome in Queensland is that little will happen at all. Furthermore: dis-organisation similar to Victoria could occur in major functions such as transport, education and health; expensive 'white elephants' could be built; corporatised Government enterprises exposed to competition could suffer losses due to excessive or insufficient constraints, and a lack of skills; and corruption could prosper in the vacuum created by the displacement of competent experience from the public sector. (From present author's submission to MLAs, 8 may 1993)
Summary of Key Points in The Fall of the House of Cain
The Cain Government emphasised 'big' policies, which eliminated smoothly working machinery. The Public Service was badly damaged in the name of reform, creating mistrust, division and politicisation. The Kennett government is using a similar approach.
Background: Labour had been elected in 1982 after 27 years in opposition. Cain handled Parliament and the media well, and engaged support for reform. Parliamentary systems were weak in Victoria resulting in a strong public service and many strong semi Government bodies. The reform agenda in 1982 was to improve efficiency. Political interference was traditionally seen as a bad thing, and the system of Commissions minimised its effect. The Victorian Public Service had a strict 'Westminster' character. Pressures in the 1970s indicated the need for changes which were built into the Labor programs. In opposition Labor produced blueprints for radical change. These were up to date policy ideas, but were seen as 'holy writ'. These ideas included a rejection of the role of bureaucracy, belief in modern management, and cynicism about public service manipulation based on 'Yes Minister'.
A former Minister argued that public service manipulation (as in 'Yes Minister') often stopped new Ministers making fools of themselves. Victoria's public service had a tradition of neutral, if stodgy, service. External appointments increased after 1974, and accelerated under the Cain Government which changed the character of the public service.
Public Service Reform: Labor's 1982 reform agenda was based on the ideas of Whitlam and Wilenski. It sought a reform oriented bureaucracy, which would be: efficient, accountable and equitable; co-ordinated in line with Government policy; subject to efficiency audit and effectiveness review. A common employment framework was envisaged to increase staff mobility. Power was to be devolved. Co-ordination would reside in the Premier's Department; the budget process would be reformed; departmental autonomy for staffing would increase; FOI would be introduced and an Administrative Appeals Tribunal. Because of Labor's long period out of office, the Public Service was not trusted. The belief had grown that it was politicised. There was no recognition in the reform agenda of past efforts.
Once in power, the Premier's Department was changed to support Cabinet, by lifting it's policy / co-ordinating role. Large politically aware Ministerial advisory units were established. Treasury became an Office of Management and Budget. Statutory authorities were brought under closer ministerial control to ensure: responsiveness; co-ordination; better policies; co-ordination of borrowing and investment; and to gain access to their funds.
Many outsiders were introduced to senior levels in the public service. Existing staff left in droves. Those who stayed watched some new department heads create turmoil. Some new staff were appointed for academic or management qualifications, others for their assumed loyalty. The distinction between ministerial advisers and departmental advisers was blurred. Management was unstable, as new ministers made large changes at senior level.
The view was that government could be run like a business (managerialism). Management skills were seen to be interchangeable rather than requiring specialised knowledge. New recruits had management and economics training. An elite 'Senior Executive Service' was created on terms similar to the private sector. Managerialism devalued professionals and career public servants. The latter had greater knowledge of (say) health, agriculture or education - but were told they knew nothing about managing. The outcome was that the public service became an end in itself rather than concerned with real outcomes. Junior staff were promoted beyond expectation, through political connections. This led to poor morale. Politicisation meant that senior management ceased to be a 'brake' on expansionist ministers. Whilst building up a team of 'super managers' in the public service, the Government cut resources at the coal face.
Finance: The Cain government indicated that it would not take notice of the 'bean counters', but would create an Office of Management and Budget' out of Treasury. This was done in 1983 under Sheehan (from IAESR) whose approach was Keynesian (ie belief in Government 'pump priming'). Other changes included: use of Government resources to create employment; funding this by abolishing the sinking funds used to retire Government debt; and establishing a State Development Program. The spending stimulus (welfare housing) was not removed when recovery strengthened. Victoria's debts, which fell in the 1970s, grew rapidly in the 1980s. The emphasis was on expansion. It was 'unfriendly' to suggest that anything might go wrong. Many reforms were constructive, but led to debts which now require tax increases. The Department of Manufacturing and Industrial Development concentrated on expansion without any thought about defences if things went wrong. Despite this Victoria's growth during the 1980s was below the national average. Other factors made more difference.
The VEDC was intended to stimulate innovative companies with good growth prospects. After 1982, the VEDC grew quickly. Rapidly growing institutions attracted bad debts faster because institutions hold clients with good debts service records. This problem was recognised by experienced VEDC staff, but decisions came from the Board or Ministers who did not. The VEDC was praised for the quantity of its lending, with no concern for its quality. After 1984, its role was expanded to fit Government policy. The Board ceased to be businessmen but became Labor appointees. Lending was to sectors targeted as having good prospects. Extraordinary practices occurred - which took years to detect, and were then denied for political reasons. An inquiry identified losses of over $100m, poor management practices and flawed relationships between the VEDC and Government.
The State Bank of Victoria failed because of the climate of rapid change; and the pre-occupation with 'Labor' policy. There was reduced capacity to cope with adverse events. The problem was its merchant banking arm. Initially a share in Tricontinental had been acquired for $1m to get experience in Merchant Banking. Deregulation eliminated its protected niche market (the short term money market). Other investors sold their shares. It could only survive by adventurous financing practices, for which it lacked the skills, and was left with $2bn losses after markets collapsed. It had borrowed money with implied Government guarantee, so the Government carried the loss.
The Pyramid Building Society was the largest in Victoria. It used aggressive practices (ie higher interest rates etc) but was not really exposed. But rumours circulated of a liquidity problem causing a run on the society. Normal practice was to support the society. Given the shock over the Tricontinental losses, this proved impossible. When the statutory liquidity limit was reached, the Society was wound up, with losses from selling into a weak market.
Transport: Rail usage had grown until the 1950s, and then began to decline. Attempts to cut services were difficult. With inflation in the 1970s costs soared. In 1982, the system was in need of repair. Labor favoured a 'new deal' by new funding to increase usage. New organisations were created. Existing staff left (for early retirement or because of upheaval). Many outsiders were appointed. The objectives were to: reduce staff; better integrate services;2 bring in commercially oriented staff. Many staff had no transport experience, but only knowledge of transport theory. The organisation went straight from tradition bound routine into chaos. Capital spending escalated. Usage grew (a trend established before reforms). Deficits rose above $1bn. Service quality fell. Staff morale was poor.
Health: A constant program of big reforms were undertaken. These included regionalisation, and de-institutionalisation. The overall process became extremely confused at senior management levels, with extensive paper work. Resources went into an administrative elite, leaving no more for services. This was due again to activities of management specialists, who were unfamiliar with health and welfare. Paperwork was far preferred to action.
Education: The Victorian Certificate of Education created unbearable pressures on Year 11 and 12 students. The volume of work and stress was very high. VCE had originated to promote equality of access. It was turned into redesigned standard curriculum by group of experts using state of art thinking. It was accepted politically, and was immediately seen as a practical disaster. The volume of work very high, and the competencies of persons undertaking it were seen as suspect. The rules were changed, but did not fix the problem.
After Cain: When Cain ceased to be Premier in 1990, Labor leadership went to the socialist left who were still in favour of heavy government spending.
Overview: Cain had: delegated Treasury to a young inexperienced Minister; and allowed Ministers to replace senior administrators with inexperienced University staff. The Cain Government was unlike no other in following theories, supported by party factions, with growing gaps to the public service. The nature of what was happening was only slowly recognised by the public, because of centralised media liaison. Critics were answered in terms of Government's electoral 'mandate' without any critical scrutiny.
|Attachment D: Why Are Bureaucrats Bureaucratic?||
ATTACHMENT D: WHY ARE BUREAUCRATS 'BUREAUCRATIC'?
Source: Reproduced from Craig J., Transforming the Tortoise: A Breakthrough to Improve Australia's Place in the Economic Race?, Prosperity Press, PO Box 74 Nundah, 1993
Government is not like business. In a business, the Board of Directors want staff to be responsive to the desires of their customers, because that is the way a firm makes its profits.
In government, by contrast, the Board of Directors (eg Cabinet), usually want staff to be responsive to ministers ie to the desires of interest groups which have been convincing through the political process. This is often not the same as the needs of individual 'customers'. Thus the bureaucracy must force the public (their 'customers') to do things which the latter do not want to do, or supply them with things they do not want, and is therefore 'bureaucratic'. In the process, the bureaucracy learns something of what is required in the community, and that interest group desires may be inappropriate in particular situations. Further, the bureaucracy can study best practices elsewhere. When such conclusions are pointed out to the 'Board of Directors', bureaucrats are again seen to be 'bureaucratic' by challenging political control over policy.
The inconsistency of pressures to respond to interest groups and to 'reality' (ie particular cases, and current ideas) can produce institutions which are unable to respond usefully to anything at all. Consider the following hypothetical case study:
Whilst this is an over-simplification and public officials can seem inefficient or self interested for many reasons, there is an inevitable tension between messages given to the public sector by politics which usually only accepts ideas when they are widely known or valued by influential interest groups, and by the world of real day to day contacts and leading edge ideas. The more rapidly the situation changes, or the more complex it becomes, the greater this discrepancy must become.
The consequences are not trivial. Senior level staffing on the basis of political compliance can hold up serious consideration of alternatives to irrelevant programs for decades. It was just such dynamics which kept Queensland's industrial estates program going for 25 years at a cost of many tens of millions of dollars. The emphasis on compliant provision of public goods and services meant that no one in the bureaucracy seemed to see, as others did after 15 years (eg Berryman J., `Survey of Business on Queensland's Industrial Estates', Planner, V21, N2 June 1981) that industrial estates did not really influence the location decisions of manufacturers. Such problems are the results of the dynamics of complex political / administrative / economic systems, not of incompetence.
The outcome can be even less 'intelligent' if:
Asian societies resolve this by rejecting interest group politics and accepting a strong elite bureaucracy. The USA solves the conflict by a 'free market' ideology, and tolerating a politicised and useless bureaucracy. Australia has tightened political control, whilst expecting the bureaucracy to provide efficient services to its 'customers', and give useful policy advice. This is not feasible, and massive stress in the bureaucracy is the only real outcome. Many know something is wrong, but they are being blamed, not heard. The community continues to elect politicians who promise to bring the bureaucracy under control, though a loosening of political control over administration would probably be more constructive (Ickis J. etal, (eds) Beyond Bureaucracy: Strategic Management of Social Development, Kumarian Press, 1986).
|Attachment E: Advantages of Competence over Political Compliance||
ATTACHMENT E: ADVANTAGES OF COMPETENCE OVER POLITICAL COMPLIANCE
A competent public service can be easy for others to deal with. Queensland had such a reputation as a result of strategic management of public sector change by the Coordinator General in the 1970s which created a sense of purpose and cooperation. The quality of administration worsened during the 1980s when this role was replaced by one designed to ensure support for major investors, and no alternative mechanisms for integrated administrative development were created.
Secondly, inputs to public policy from political sources reflect sectional views). A competent public service (which responds to `reality', rather than merely complying with political wishes), can ensure that public policy considers more balanced views by pro-actively identifying alternatives and policy options. `Politicisation' (eg by insisting on unquestioning compliance) eliminates such balance, and also increases the power of the public service relative to ministers (because the latter are only presented with one point of view and thus have no choices to make).
Thirdly, political compliance reduced the credibility of political leaders and of the democratic process, because it erodes the competence required to implement policy successfully (eg by removing skills, organisational memory, networks). Thus what the politician promise is less likely to actually happen (except on paper).
Fourthly, corrupt behaviour is more likely when officials are disinclined to point out defects in political decisions and outcomes (Davis B., `Public Service Culture May Foster Fraudsters', Australian, 24/7/95).
Finally, the absence of political accountability in successful economies in East Asia has implications which should be considered. Such government's are dominated by bureaucratic elites (and true democracy is rejected). The very rapid economic development achieved by Japan (and others) is probably a consequence of such government styles, for reasons suggested in Attachment G). This can only be effective because of a different epistemology (philosophy of knowledge) in such societies.
The debate about political responsiveness in Australia has been seen to be about the distribution of power (Tingle L. `The Politics of Policy', Australian, 1/8/95). However this reflects a Western view which equates power with decision making. This is not the usual assumption in East Asia (See Pye J., Asian Power and Politics: Cultural Dimensions of Authority, 1985). Rather power is equated with having subordinates who make one's decisions. Influence is exerted by having access to a great deal of information in order to influence the thinking (and thus free decisions) of others. Such issues are relevant to Australia, because of Australia's economic difficulties, the need to interface with East Asian societies, and the direct impact which such methods have here.
Australia is in the `front lines' of a context between civilisations which have different approaches to the discovery and use of knowledge. Even in Western societies there are differences such as between empiricism (which emphasises gaining knowledge from the material world) and rationalism (which stresses reason). Anglo-Saxon societies value empiricism more, whilst Continental European cultures tend more towards rationalism. However differences with East Asian societies (eg Japan) are much greater, as they use epistemologies which deny the existence of truth. Where Western societies succeeded economically on the basis of reason and science (technological innovation), Japan succeeded on the basis of arational organisational innovation (eg through methods such as `bottom up' decision making). Such methods are not applicable to all problems, or always successful, but they are fundamentally different. These issues have been considered in detail in Transforming the Tortoise: A breakthrough to Improve Australia's Place in the Economic Race? (Prosperity Press, PO Box 74, Nundah, 1993).
Without support from an effective (and well informed) bureaucracy, Queensland's democratic process will even more susceptible to manipulation than that in countries such as Japan (especially given the limited understanding of current public policy and economic strategy issues which is independently available to Queensland's branch office / small business community).
|Attachment F: The Limited Economic Effect of 'Commercialization'||
ATTACHMENT F: THE LIMITED ECONOMIC EFFECT OF `COMMERCIALISATION'
The main economic problem with public sector commercialisation is that it is not a significant or effective method for dealing with Australia's economic challenges.
In particular, the public sector is only 30% of Australia's economy. Greater scope for gain lies outside the public sector (eg by creating a well developed economy as suggested in Attachment G).
Furthermore, real commercialisation is intrinsically impossible in government due to public accountability. Government is not like a business. In a business, the `board' wants employees to be responsive to customers, because this is how profits are made. In government, the `board' wants employees to be responsive to ministers (ie to the desires of influential interest groups).
The `public service' model was an attempt to ensure reasonable productivity, whilst being politically (rather than primarily customer) responsive. There are limits to gains from common commercialisation measures. In particular:
Furthermore where market mechanisms are feasible, productivity improvement by the use of commercial methods is limited. Commercialisation has been sought to increase public sector efficiency. However efficiency is not the major source of potential productivity gains. Productivity refers to the value added (wages, return on capital, nett taxes) relative to resources used. The productivity of an enterprise depends not only on its efficiency (ie output / input ratio), but also on its quality (providing what customers value) and flexibility (responding to changes in customer's demands). According to Australian Productivity Council data only a fraction (say 20%) of productivity gain comes from greater efficiency. Thus the main sources of productivity improvement are denied to government agencies because it is unrealistic to assume that they will not remain primarily politically, rather than customer, responsive.
Reported increases in Government revenue from corporatisation are not necessarily the result of increased productivity. They could also result from asset stripping, or monopoly profits. Furthermore corporatisation (eg under the Queensland model) contains flaws, in that GOEs are subject to accountability constraints which would make it impossible for them succeed commercially in the competitive environment, envisaged by the National Competition Policy (See supporting document, The Paper Government: A Review of Queensland's 1994 State Budget, Section 9). Competition policy will increase the incentive of GOEs to be productive but not ensure that they have the capability to do so. The main scope to increase GOE performance probably is to eliminate the detailed and prescriptive regulation with which Australian GOEs have been controlled to maximise political accountability (See The Paper Government, Section 9.5). However effective operations require not only internal productivity, but also a developed economic environment to provide appropriate support. In Queensland, at least, this does not really exist, and is not being created.
Thus it is likely that only limited economic gains are possible from asking governments to pretend to be `commercial'.
|Attachment G: Economic Solutions Appear to be Beyond Politics||
ATTACHMENT G: ECONOMIC SOLUTIONS APPEAR TO BE BEYOND POLITICS
Australia's economic thinking over the past decade has been characterised by a market oriented approach (which did not favour direct government economic intervention). This emerged because:
Such concerns have some basis, and demonstrate why governments can have difficulty correcting market failures. However, market failures are none-the-less real.
One further problem is that a `free' market enables growth within the existing productive capabilities of an economy. But it does not rapidly increase those capabilities (ie develop the technological capabilities of economic agents, and the effectiveness of economic processes such as innovation). Australia's economy shows symptoms of slow economic development ie growth in low value added sectors (eg tourism) leading to declining relative incomes, and productivity increase which are not fast enough to provide the competitiveness to overcome current account problems.
Despite market oriented changes and the application of up-to-date theories of macro-economic management, Australia's fundamental economic problems have not been resolved. A Better Way of Sustaining Growth (enclosed as supporting document) highlights plausible theories which were tried and found to fail over the past decade (see Sections 8 and 9).
Leadership in the development of practical economic capabilities is required (in addition to the development of enterprises) if productivity growth is to be maximised. This requirement is considered in a macro-economic context in A Better Way of Sustaining Growth.
Both enterprise and economic development are needed to achieve sufficient productivity increase to overcome current account constraints on fast growth (as imports are increased by growth, but not necessarily matched by exports unless competitiveness grows rapidly - which requires productivity improvement if real incomes are to be maintained). Economic development involves directly increasing the ability of business and communities to initiate and support high productivity enterprises and industries, by altering the efficiency, quality and flexibility of the economic system as a whole. There is (probably) a means to manage economic development, via strategic management led by apolitical organisations (given appropriate protocols). The effect is to speed up the rate of development (re-organisation) by the economic system as a whole. This changes `causal' relationships within the economy. This approach might involve: treating major investments as a stimulus for initiative in real social / economic systems (rather than as just a design and analysis exercise); or systematic attention to the effectiveness of economic mechanisms, needs for which will appear as market gaps, for which indicative business plans could be prepared. Direct economic development can reduce the `chicken and egg' problem which constrains economic development and potentially double the rate of productivity gain by an economy, and alter its areas of competitive advantage.
Capabilities to accelerate such development (rather than encourage growth in existing low value added areas of comparative advantage) have been the basis for the very rapid economic progress and competitive strength which has been created in Japan (and is rapidly emerging elsewhere in East Asia) (though this is contrary to the assumptions of conventional economics for reasons explored in attachments to the author's letter of 8 May 1993 to MLAs). Such capabilities set a new standard for societies which wish to be affluent (if they prove sustainable, which is not yet proven).
Unfortunately economic development is intrinsically impossible for representative political organisations. Firstly, the interest groups to which politics responds, bias any outcomes towards wealth redistribution rather than wealth creation. Secondly, economic development requires accelerating the rate at which the economy as a whole `learns' to re-arrange itself to suit emerging opportunities and threats. Representative politics reflects what is widely known and accepted (and thus tends to slow the rate of economically relevant learning).
None-the-less the economic challenge exists, and is not resolved just because there is no obvious way for Australia to deal with it. A case can be made that Australia's traditional political system may be unsustainable because it is structurally incompatible with current economic requirements.
However apolitical mechanisms might be able to deal with this challenge, and so protect Australia's political tradition (see Transforming the Tortoise: A Breakthrough to Improve Australia's Place in the Economic Race, 1993).
|Attachment H: Redeveloping Queensland's Administration||
ATTACHMENT H: RE-DEVELOPING QUEENSLAND'S ADMINISTRATION
The following are provisional suggestions, based on general considerations not recent close study.