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Broken Governance and Ineffectual Economic Strategy: Two Sides of the Same Coin? - email sent 8/12/15

Ross Gittins,
Sydney Morning Herald

RE: Broken public service leads to broken governance, Business Day, 7/12/15

Your article highlighted governments’ dependence on the public services’ knowledge and experience (eg public servants’ memory of what works and doesn’t work) – and the ineffectual governance that has emerged in Australia as this has been lost. This issue and its consequences have been obvious for decades to anyone with experience of the requirements for effective government – but apparently not obvious at all to Australia’s civil society and political establishment.

My Interpretation of your article: It is important to consider why Australia’s governence has become so bad (eg with superficial policy discussion and ill- considered policies). Laura Tingle (in ‘Political Amnesia’, Quarterly Essay) has identified a neglected part of the problem. Politicians and public servants have forgotten how to govern. Public services have lost policy expertise – including memory of what works and what doesn’t). And politicians have forgotten that they can’t do their jobs without expert public service guidance. The public has a Yes Minister view of the public service – ie that public servants ran everything. But now the opposite is true (ie ministers’ private offices have most power). These ‘reforms’ started at the time of the Whitlam Government and were continued by others. Now senior bureaucrats seldom have long experience in their own department. There are expected to be universal managers, rather than experts in a particular area. New governments sacked many department heads – not to ‘politicise’ the public service but to force others to toe the line and not provide fearless advice – or propose anything the other political side might object to. The Liberals don’t trust the public service – seeing it as a union bastion. Departmental secondees no longer occupy many positions in ministerial offices. They have been replace by people seeking political careers. ‘Efficiency dividends’ are sought which make those with policy expertise redundant. As departments are weak on policy, expensive consultants are brought in who pretend to know more than they do. The 2014 federal budget demonstrated the folly of doing this. The Turnbull Government may reverse these trends.

On the basis of exposure to the changes like those your article mentioned (ie undermining public services’ ability to contribute to effective government), I should like to submit for your consideration that the presumption that a central (eg political) group ‘knows it all’ has been a major part of the problem.

I should also like to submit that the difficulties that Australia has had since the 1980s in developing strengths in innovation to boost economic productivity, job creation and government revenue have had a similar cause.  Moreover weakness in each of these areas has further weakened the other (ie weak government capabilities contributed to ineffectual economic strategy, and tactics intended to boost economic performance (eg by  competitive service delivery to lift efficiency) contributed to governments’ declining ability to ‘govern’).  There is a need for a different approach in both these areas.

My reasons for suggesting this are outlined in Details of Why Broken Governance and Ineffectual Economic Strategy are Two Sides of the Same Coin

John Craig

Details of Why Broken Governance and Ineffectual Economic Strategy are Two Side of the Same Coin

In the early 1990s the present writer was exposed to process of public service ‘reform’ along the lines the subject article described (ie a process based on a ‘Yes Minister’ view of public services) - see Towards Good Government in Queensland (1995) and Queensland's Worst Government? (2005). Inexperienced ‘reformers’ were allowed to determine who had the knowledge and skills to best support government. A view prevailed that ‘senior’ officials needed to be generalist managers and did not require knowledge of the function they were managing. Government’s primarily non-business-like functions were expected to be managed in a competitive business-like manner. Politically-connected ‘reformers’ managed to create a public service which was incapable of supporting the new government in carrying out its widely-supported policy agenda. The Goss Government unexpectedly lost electoral support a few of years later because little was being achieved even though the ‘reform’ agenda corresponded to what ‘everyone’ (ie academics, business and the media) believed was needed. An almost identical ‘reform’ process had been implemented in Victoria some years earlier – which generated even more catastrophic outcomes as the new Cain Government had tried to use its incapacitated government machinery to address a risky and innovative policy agenda (see Review of the Fall of the House of Cain, 1992). Yet little had been learnt and much the same ‘reform’ process was used in Queensland.

An attempt to document what was going wrong through the erosion of public service competencies that the subject article described was outlined in Decay of Australian Public Administration (2002). This included reference to: (a) de-skilling of public services and eliminating their motivation to warn governments when their policies were hazardous; and (b) the adverse effects on governments’ ability to ‘govern’ that followed from the adoption of commercial / competitive tactics to boost ‘efficiency’. The top-level capabilities required for efficient service delivery are not the policy capabilities required to 'govern' effectively' (ie knowledge / wisdom about how the world outside government would best operate)- so the latter tended to disappear. Moreover ‘governing’ and dealing with functions subject to serious market failures often required cross-functional collaboration, but the structural arrangements needed to boost competitive service delivery were often an obstacle to vital cross-functional collaboration.

By way of background it is noted that while working for the Coordinator General in Queensland in the 1970s the present writer had the opportunity to observe a relatively effective process of public service reform. A capacity to address new ‘areas of critical concern’ (ie environmental management and regional development) was created by building on (rather than replacing) existing organisations and staff capabilities. Working for some years in a central coordination role in government (and studying this for a master thesis) also revealed the importance of the intellectual and experiential capital that resided in public services. Thus in 1990 the present writer circulated a note in relation to the incoming Goss Government’s public service reform agenda which highlighted the critical importance of building on (so as not to lose) existing knowledge and experience (see Changing the Queensland Public Sector, 1990). Unfortunately this was the complete opposite of the tear-it-all-down-and-start-again ‘reform’ methods that were favoured by the Goss Government’s political insiders. Providing frank and fearless advice to ‘reformers’ who knew everything proved to be a bad career move (see CV).

The core problem was that populist notions about public service reforms (based on Yes Minister assumptions) were being driven by people who had no idea what was required in practice for effective government. And political ‘populism’ had adverse effects in many areas – because of the lack of a reality check by experienced / knowledgeable public servants (see On Populism, 2007). Examples of some dysfunctional consequences of losing effective public services were listed in Towards a Professional Public Service (2001+).

The fact that there are fundamental problems in Australia’s system of government (an aspect of which the subject article referred to) first gained public attention in 2010 when the Rudd Government was seen to have ‘lost its way’ (see Recognising the Need for Nation Building). However what was not recognised was that there was a perverse relationship between ‘reforms’ that were supposed to: (a) improve public services; and (b) strengthen the economy (see S-L-O-W Learners, 2010 and Overcoming Australia’s Government Paralysis, 2010). Reforms to ‘improve’ the public service resulted in ineffectual tactics to strengthen the economy, and the ineffectual tactics used to ‘strengthen’ the economy resulted in an ineffectual public service (eg see Neglected Side Effects of National Competition Policies, 2004). A well-functioning public service could have identified and found ways around these conflicts - through consultation and consensus. But such a service no longer existed.

The subject article expressed hope that the present federal government might have learned the importance of listening to realistic advice. However this does not seem to be happening. A key component of the Turnbull Government’s efforts to deal with Australia’s increasingly-critical economic and budget challenges reportedly involves spending $1bn to ‘drive innovation’ (eg see ‘Malcolm Turnbull’s bright idea: $1bn to drive innovation ’, The Australian, 7/12/15). There is no doubt about the importance of effective innovation to solving Australia’s economic and budget problems. This has been increasingly recognised and sought by almost everyone since the 1980s.

However the methods used to achieve change have been ineffectual. In order to make a positive economic and budget difference, innovation has to be driven by ‘market pull’ rather than by the ‘political push’. Innovation involves the effective application of new ideas / methods (eg to create or adapt successful businesses). There has never been a shortage of potentially valuable innovation opportunities in Australia. What has been, and remains, missing is the commercial competencies and organisation to apply those options in successful businesses – and this is why potential local innovators have so often been forced off-shore. What government does in terms of tax and regulatory arrangements matters. And government spending on economic inputs (eg advanced education and research) is needed. However what is most important is to create a strong demand for (rather than merely a supply of) such inputs. It would be possible to create much stronger market-driven innovation-support capabilities through ‘strategic market management methods’ that build on existing commercial competencies and organisation (eg see Towards A Business-like Approach to Innovation, 2015). Such an approach needs to be considered because, while conventional growth theory would support government efforts to ‘push’ knowledge inputs into the economy (because growth theory regards knowledge inputs as the key driver of growth), knowledge probably has its main impact on economic productivity and growth because of its role in changing (rather than merely acting as an input to) economic systems (see Probable Breakthrough in Understanding Economic Development, 2004). The suggested 'strategic market management' approach would use strategic information to allow groups of market-oriented entities to discover opportunities for mutually-supportive initiatives in an apolitical environment.

Government’s best contribution to boosting Australia’s innovation performance would involve ‘governing’ (ie creating an environment in which others can ‘do things’). However in the absence of strong policy capabilities and where governments’ ability to ‘do things’ efficiently is being emphasised, governments’ ability to ‘govern’ (ie create the environment in which others can 'do things') is likely to be weak and micromanagement (ie trying to determine and control everything that apparently needs to be done) is likely to prevail. And, as in public service ‘reforms’ in recent decades, the presumption that a central group 'knows everything' risks displacing / over-riding, rather than building on, the grass-roots knowledge, experience and organisation that already exist in the market economy and that are vital for the creation and enhancement of economically productive support for innovation.

In practice trying to ‘drive innovation’ by ‘political push’ will simply tend to generate large numbers of inputs to market economic systems that will remain insufficiently developed to use them productively, and create ‘political’ components of artificial ‘innovation systems’ which are neither particularly profitable nor well integrated (because of the lack of strong ‘market pull’). While there are a few constructive new elements in the Turnbull Government’s National Innovation and Science Agenda, it seems unfortunately to bear a strong resemblance to the Backing Australia’s Ability programs that failed to achieve much early this century (see The Economic Futility of ‘Backing Australia’s Ability’, 2004).

Possible ways to reduce the weaknesses that currently afflict Australia’s system of government (including those related to ineffectual public services) were suggested in A Nation Building Agenda (2010).