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Beyond Populist Rhetoric (email sent 27/3/11)
Michael McKenna,
The Australian
Re:
Campbell Newman has Queensland’s public sector in his sights, The
Australian, 26-27/3/11
Your article referred to proposals by Campbell Newman for
resolving Queensland’s economic and governmental woes. I should like to suggest
for your consideration that (so far) his solutions seem unconvincing. Attention
most needs to be given to raising the quality of the economy (as reflected in
its productivity, and thus the strength of the tax base) and of policy advice
(from both the community and the public service). Campbell Newman’s proposals
(if they are as your article suggested) would not boost the knowledge, skills
and experience that underpin either Queensland’s economy or public policy any
more than others’ efforts have done.
My interpretation of your article:
Campbell Newman would cut Queensland’s public service, outsource management of
government assets and hand more power to councils – in an effort to boost
infrastructure spending and revive the state economy. His focus would be on the
economy. The
ALP (under Bligh and Beattie) is seen to have allowed the bureaucracy to get
out of control. Newman sees Queensland’s economy as foundering and in desperate
need of infrastructure spending to entice investment (eg dams to support
agriculture). ALP will object that it is already struggling to fund services.
But Newman envisages balancing increased spending with public service savings –
arguing that Brisbane City Council numbers had been slashed by attrition not
sackings. Efficiency dividends would be forced on departments. The bureaucracy
is seen to be huge and out of control – so the head count needs to be
controlled. More spending is needed on infrastructure, with less on services.
Former LNP leader was seen to have ignored business calls for more
infrastructure spending, and failed to set out a detailed economic vision.
Despite past LNP criticism of Ms Bligh’s privatisation program, Mr Newman saw
room for more. Private firms could maintain government-owned power grids.
Government authorities don’t need to own coal terminals.
In relation to the specific proposals that your article
ascribed to Campbell Newman it is noted that:
- Infrastructure is only one component in a developed economy, and
is usually not, by itself, the key to stimulating growth. A better alternative
would be to empower strategic leadership in market oriented learning within
potential industrial clusters. This should help strengthen government’s tax base
and revenues;
- Infrastructure spending has already been escalated enormously in
Queensland. However much investment has been badly
directed or even wasted, mainly because poorly
advised changes to government machinery rendered the latter largely ineffectual;
- To overcome such problems, there is a need to re-consider (for
example): the nature and functions of government; the effect of centralised
efforts to decide / control everything; and the contribution of public service
knowledge and experience to effective government;
- Undertaking some government functions through the private sector
can provide some, but unfortunately limited, benefits;
- Problems in government have been obvious for years, and will be
hard to fix. These have not arisen simply because the public service is ‘out of
control’ and too numerous. Efficiency dividends or counting heads will achieve
little (and could be counter-productive). Improving the quality of government
decisions (with the support of a better informed community and a professional
public service) is the best route to achieving more effective government and
cost savings.
These suggestions
about the need for more than populist rhetoric are developed in more detail
below.
John Craig
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Details
Getting Serious about Economic Development
- Infrastructure spending is necessary to complement the growth of
productive economic activities, but it will not necessarily stimulate those
activities – as can be
illustrated by Queensland’s past emphasis on publicly-funded industrial
estates (which in some ways were the equivalent of the ‘Cargo Cults’ practised in New Guinea);
- Queensland’s infrastructure backlogs have been largely the result
of: (a) rapid population growth (especially in SE Queensland) due to high rates
of migration; and (b) problems in government machinery that had been exacerbated
in the 1980s and 1990s (see below). Rapid migration was probably started by
eliminating death duties in the 1970s, and then became a self-sustaining
‘sun-state’ phenomenon (see
SEQ 2001 suffered from naval gazing, 1994). While rapid population growth
(and eventually massive infrastructure investment) has sustained high rates of
economic growth, it has not contributed much to economic development
(ie to creating an economy that is well-positioned strategically, or highly
productive). Queensland’s gross state product grew faster than the national
average for some years, but in per capital terms (a measure of productivity) the
state’s GSP has remained below the national average. Now one major driver of
past growth (ie interstate migration) seems to be disappearing – and thus
creating negative feedback effects on job prospects (see
Speculations about Queensland's Economic Predicament, 2010). This arguably
reflects: (a) the shock of the global financial crisis; (b) the fact that
housing is no longer much cheaper than in southern cities; and (c) increasing
congestion and household costs partly due to poor infrastructure efforts;
- Strategies put in place by governments since the 1980s to try to
raise the quality / productivity of the state’s economy have not been effective
– because they have been politically, rather than market, oriented (eg see
Queensland's Economic Strategy, 2002 and
Commentary on 'Smart State', 2003). As noted in the former, government
programs to ‘assist’ individual enterprises, while they may be politically
appealing and lead to short-term activity, are actually obstacles to developing
the economy (ie to increasing complementary firms’ ability to provide effective
and sustainable assistance to one another);
- Better methods are outlined in
A Case for Innovative Economic Leadership (2009). The latter suggested
democratically empowering new methods for market-oriented economic leadership to
accelerate the emergence of economy or region wide systems that individuals /
enterprises require for success in high value-added activities. Economic
opportunities that might be given particular attention could include:
agribusiness; functions linked to mineral and energy resources;
globally-oriented small and medium enterprises; existing embryonic industry
clusters in various regions; and functions linked to solving social and
environmental challenges. While the need for dams (for example) to support
agriculture might be an outcome of such a process, it should not be seen (in the
absence of all complementary functions) to be the sufficient precondition for
the emergence of a productive industry;
- Effective economic development methods should boost economic
productivity (and the tax base), and thereby reduce government financial
constraints
Infrastructure Problems: Partly A Self Inflicted Wound
- Queensland’s infrastructure spending has already increased
dramatically – from about $3bn pa in the mid-1990s to about $18bn pa. Many
problems have arisen as a result (eg as noted in
'Neglect catches up with Beattie' - 'Sunshine dims as borrowing goes up',
2007). The latter, in commenting on the jump from $10bn pa spending to $14bn pa,
noted: (a) the dubious capital accounting that had apparently been the basis of
funding some spending; (b) the cost blow outs that had resulted from
simultaneous infrastructure and resource investment booms; and (c) the dubious
nature of some water infrastructure investments;
- Poorly considered infrastructure investments have also been
apparent in electricity (see
Failure in Queensland's Electricity Distribution Network, 2004) and
transport (see
Brisbane's Transportation Monster, 2008). Causes of ineffectual and wasteful
infrastructure development arguably include: complexities and buck-passing due
to extreme federal financial imbalances; and political advisers’ naivety about
the nature and functions of government. Machinery of government was crippled by
politicisation, loss of essential knowledge and experience and attempts to apply
business-like methods to non-business-like functions (eg see
Defects in Infrastructure Planning and Delivery in Queensland, 2002).
Some Overlooked Requirements for Effective Government
- The core function of government is ‘governing’ (ie creating a
framework in which others can do things, eg via a system of law). Limits on the
ability of central decision makers to acquire the dispersed and often-tacit
knowledge needed to decide everything is the basis of economists’ case for a
market economy. The same constraint also applies within complex organisations
such as governments. Thus government leaders who don’t recognise that they can’t
know and decide everything can cause serious problems (see
The Secret of Failure: Claim Wisdom without Practical Realism). Political
leaders can usefully state the community’s aspirations to provide a coherent
sense of direction for decentralised efforts. This can be part of the core task
of government (and its leaders in particular) of creating frameworks in which
others (both externally and internally) can decide and take the initiatives
needed to achieve practical outcomes.
- Unfortunately machinery of government intended to facilitate
highly centralised strategic control of outcomes was put in place in Queensland
by the inexperienced Goss administration – and, though partly reformed later,
this has done a great deal of damage by: (a) initially purging the knowledge and
skills required to do anything other than carry forward that government’s
electoral policies; and (b) subsequently suppressing the knowledge, experience,
initiative and commitment of those not at the centre. Highly centralised
machinery of government seemed to be the major factor in the inadequate skills
and bullying culture exhibited in agencies such as Queensland Health – and the
medical failures that resulted at Bundaberg Hospital (eg see
Intended Submission to Health System Royal Commission, 2005);
- There has been no serious consideration of the importance to
effective government of the public service’s knowledge and skill base (eg see
Competence is more useful to good government than compliance and
Misunderstanding the Public Service’s Contribution). For Australia’s system
of government to work, the public service needs to complement political
understanding of the popularity of policies with knowledge of practical
requirements, and of the hundreds of other considerations that arise from past
policy decisions (or the emerging environment) that are not in the present
government’s agenda. Eliminating the knowledge and skills required to do this in
a search for unquestioning compliance has led governments to now often pursue
populist (ie trendy-sounding but ineffectual) policies, in the way that they
could not have done previously (see
On Populism, 2007).
Public-Private Interface
- While the possibility of transferring government functions to the
private sector should always be kept in mind, it is not a panacea for problems
in government, and can create new sets of problems;
- Governments traditionally take responsibility for providing some
goods and services because market failures exist and imply that problems will
arise if they are undertaken by the private sector (see
Governing is not Just Running a Large Business). Providing goods and
services in a political environment can generate inefficiencies. However private
sector involvement, hopefully to promote operational efficiencies, may be of
limited benefit, because market failures remain and have to be dealt with in
other ways that offset operational cost savings (see
Public-Private Partnerships for Infrastructure, revised 2002);
- Privatisation (ie transferring ownership to the private sector)
can generate problems for functions that are subject to serious market failures
(as illustrated by problems with the
Dalrymple Bay Coal Loader). Privatisation options should be considered in
terms of whether or not market failures exist that require public ownership,
rather than in terms of (say) the effect on government balance sheets;
- Outsourcing the performance of some government functions can be of
great value (eg via contracting). However, in doing so, there is a critical need
to ensure that the knowledge and skills in the public service related to those
functions remains in advance (and independent) of contractors. A risk otherwise
emerges of private contractors gaining the ability to politically manipulate
public programs in their own interests (as appears to be a major problem for the
US administration – noting controversies about its military-industrial complex).
Embryonic versions of such problems seem to be emerging in Queensland (eg see
Conflict of Interest in Brisbane's Transportation Monster).
Fixing Queensland’s Government
- There is nothing new about problems arising in Queensland’s public
service (eg see
The Growing Case for a Professional Public Service, from 2001, and
The Decay of Australian Public Administration, 2002);
- It is unwise to blame the Government’s financial constraints on
the public service, or suggest that all that is needed is to bring the public
service under control. As suggested in
Why does Queensland have a financial problem? (2009), the ratio of public
servants to Queensland’s rapidly rising population seems to have been roughly
constant [1]. Moreover Queensland’s government for years has been characterised by
crises (eg in child protection, electricity distribution, hospitals, water
supply) and the ‘solution’ was usually to throw large amounts of money at the
problem to make it go away, rather than address the machinery of government
deficiencies that had given rise to the crises. Thus it can reasonably be argued
that it is rapid increases in public spending that have led to increasing
numbers of public servants (rather than the other way around). Billions of
dollars have also been thrown at sometimes-poorly-considered infrastructure or
at poorly-considered political agendas (eg consider
Queensland's Biotechnology Bubble, 2002);
- The head count in public agencies may well need to be cut –
hopefully by attrition, rather than by sackings. But this won’t be achieved
without disrupting services just by imposing ‘efficiency dividends’, or counting
heads. Pressure to boost public service efficiency, eg by requiring efficiency
dividends, is not new (see
Improving Public Sector Performance in Queensland, 2005). The latter was
primarily a comment on a proposal for a Service Delivery and Performance
Commission. It argued that: (a) such efforts are a most inefficient way of
boosting efficiency; and (b) better outcomes would result from restoring a
professional basis for public service, and improving community understanding
of
what governing is about. Government can be small and effective – providing its
top level focus is on ‘governing’ (ie creating a framework for others to do
things, both internally and externally). However when the top level focus is on
government’s secondary role of delivery of services (including infrastructure),
options that might result in smaller government spending will not tend to be
considered. Central agencies will be busy trying to micro-manage outcomes, and
line-agencies will be stripped of the skills and motivations to envisage
alternatives. Infrastructure involves capital expenditure as part of public
functions that have much broader implications (eg managing water resources
involves environmental, land use, legal and other considerations – as well as
perhaps building dams). Managing infrastructure projects should be a
middle-management function. When infrastructure shifts to become the
top-management focus, then top-management capacity to deal with the broader
responsibilities of government gets marginalised or squeezed out (see
Middle Management from the Top, 2005);
- Some suggestions about fixing government in Queensland are
included in
Response to an Open Note to Campbell Newman (2011). Key suggestions
include: (a) seeking much higher quality advice to Queensland’s political
process both externally (eg through more realistic and up-to-date understanding
of policy issues by community leaders generally) and internally (eg through
restoration of professional independence in public services); and (b) seeking
institutional reform, not as a precondition for ‘doing things’, but rather as a
recognised goal which is part of the process of achieving practical outcomes;
- Making government effective will not be a simple challenge, noting
the complexities involved that are suggested in
Australia's Governance Crisis and the Need for Nation Building. However
this has to be done because the continuance of populist ‘quick fixes’ (such as
scapegoating public servants or transferring parts of extremely complex
functions to the private sector) are likely to continue to make the situation
worse.
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