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Detailed Comments
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DETAILED COMMENTS
What is the Problem?
It has been suggested that Queensland's Opposition should be able explain in
detail how it would provide good government for Queensland, and how it would
respond to the state's severe budget challenges.
My interpretation of 'Campbell caught short on vision thing',
(Courier Mail, 21/5/11): Campbell
Newman and the LNP may romp to victory in the next state election, but he
appears to have little grasp of some issues. He has promised leadership / energy
/ good government – but his initial speculations about public service cuts and
further asset sales have been sidelined. The LNP’s small target strategy has
returned, and as the flood euphoria has receded and people come back to thinking
about cost of living and government service issues, the LNP has returned to its
dominant 60-40 position in the polls. This raises the question about what ‘Can
Do’ Campbell can do. The budget reply speech on June 14 would be the perfect
opportunity to outline LNP’s plans. Queensland has been sick of ALP government
for a long time, but the Opposition has been found wanting.
My interpretation of 'Enough talk, it's time to do the
walk' (Courier Mail, 11-12/6/11): No one knows what the Opposition
leader and shadow treasurer would have done about Queensland's budget challenges
(eg $2bn disaster bill; shrinking GST pool; weak property revenues; poor
business confidence and export markets; public concerns about rising costs).
There has been a lot of talk in broad terms (eg more spending on infrastructure,
while cutting taxes and restoring AAA credit rating). Newman speaks of getting
things done; but what? He recently spoke of reducing waste and red tape, and
making Queensland No1. Restoring Queensland's low tax status would be costly.
The coming state budget will give the opposition the facts on what the financial
position is. The LNP needs to start declaring its agenda.
Undoubtedly it would be desirable for oppositions to be able to do this.
However, as illustrated below, they typically can't do so and this raises
important questions about Queensland's whole system of government.
Moreover the Opposition leader raised another important (and closely related)
question in his economic vision for Queensland namely: Given Queensland's rich
natural assets, how did Queensland's economic and budgetary position become so
bad?
In brief: the
Opposition leader's
economic vision for Queensland referred to:
- his difficulties in understanding why Queensland's economic and budgetary
position is so bad given its riches in natural beauty,
climate, scenery and resources;
- an aspiration to make Queensland number one;
- his career and achievements;
- problems in:
- the economy (rating last in Commsec survey and poorly on other
indicators); and
- state finances (rapidly rising state debt; loss of AAA credit rating
which even poorly managed NSW did not do; waste and inefficiency; blowouts
in capital projects);
- transforming Queensland into an economic powerhouse by a focus on the
economy, and suggestions about issues to focus on to achieve this for:
- the property industry (regulation, red tape and government charges,
constraints on local authorities, rewriting the Sustainable Planning and Local
Government Acts);
- tourism (promoting tourist interest from China, India, the Gulf, and
South Korea);
- agriculture (reversing government neglect of agri-business; providing
infrastructure and research support, rather than criticism of environmental
impacts; reducing red-tape and providing extension services);
- mining and resources (overcoming red tape; providing infrastructure
support);
- energising Queensland economy by: focusing on what needs to be done;
rejecting bureaucracy and red tape as the way to generate wealth; opposing a
carbon tax unless there is a level international playing field; restoring
Queensland's economic compass; and encouraging business, investment, jobs.
In brief the likely answer to the Opposition leader's question (ie "... how
could it have got so bad?") is that, while external factors have played a role,
the main problem is that governments have been ineffectual and economic strategy has been amateurish
(both in seeking to rely on rich natural assets, and in the methods used to try
to diversify the economy). And those deficiencies arise from the same structural
weaknesses that cause oppositions usually to be unable to provide clear answers
to questions about their policy agenda.
How did it get so bad?
Queensland's current economic and budgetary predicament seems to have been generated
mainly by
the cumulative effect of
poor government (and weak oppositions) over a long period.
As noted below there has been very limited support from the
community for effective government in Queensland because of a general lack of
awareness in the community of the requirements for effective government or
economic success.
In particular, it 'got bad' arguably because:
- under Australia's federal system: (a) the tax sources that state
governments have available have primarily generated revenue through increasing
economic turnover rather than through maximizing economic value added; and (b)
Grants Commission arrangements provide funding for state 'needs' even if they
do not develop a strong tax base. Thus states (who have the main
responsibility for stimulating economic development) have not had a financial
incentive to take this responsibility seriously (see also
Economic Development Incentives);
- economic advice to the state government by the Queensland Treasury has
long seemed inadequate. The Treasury's goal in providing the main official
source of economic advice seemed to be to justify traditional economic
practices, rather than seek ways to improve them (eg by a broader approach to
development of the knowledge, skills and economic organisation of the
community). For example, in 1983 the present writer produced the first
proposal for diversification of Queensland's economy (Towards a Strategy
for Technological Development in Queensland). This involved goals similar
to the subsequent Smart State strategies, but quite different (ie
market-driven rather than politically-driven) methods. Such ideas (and the
notion that Queensland's economic performance had been sub-standard) were
incorporated in early drafts of a report by a 1985 Task Force in Employment,
and then edited out after after the report was 'gazumped' by the Treasury.
Inadequate advice about economic strategy arguably arose from:
- a short term focus. Expressing confidence in the economic outlook rather
than highlighting the need for change is usually in the political interests of
the government of the day. Expressing confidence can also have a
beneficial effect on levels of investment and spending (and thus on economic growth)
in the short term, even though this might constrain longer term performance;
- the conflict of interest between the financial interests of the state
government itself and the economic interests of the community generally (as
noted above). In simple terms the Queensland Treasury has been financially
motivated to provided
'economic' advice biased towards maximizing economic turnover (especially the
value of mineral and energy exports and property transactions on which state
revenues depended) rather than maximizing economic value added (which would do
most to lift the incomes of businesses and workers); and
- the quasi 'scientific' approach traditionally taken to economics. The
conventional goal of economics is to understand the way an economy
works so as to make predictions, whereas what is arguably required to maximize
economic performance is to constantly seek market-oriented changes in
the way it works - for much the same reason that innovation is widely regarded
as important in increasing the profitability of enterprises (see
Probable
Breakthrough in Understanding Economic Development);
- Queensland's small business and branch office economy and weak civil
institutions were ill-equipped to lead when the requirement achieving a
highly productive economy was recognised to depend mainly on
competitive advantages (ie on knowledge, skills and and effective
organisation), rather than on given 'comparative' advantages;
- Queensland's economic strategies have been amateurish (see
below). In brief, primary reliance was long
placed on rich natural assets, which is a formula for: booms and busts;
declining productivity in the long term; and poor economic leadership of a
community. And attempts to diversify the economy (eg the Smart State strategy)
failed because they sought politically-driven, rather than market-driven,
change;
- Queensland's 'low tax' strategy (especially the elimination of
death duties), when combined with lower housing costs than in southern
capitals, seemed to encourage increasing interstate migration
to Queensland from the late 1970s - and this stimulated rapid economic and jobs growth and thus made high rates
of migration self-sustaining (see
Does Rapid
Migration Cause or Cure Labour Shortages?). No attention seemed to be paid
to the usual fate of naive local authorities who set rates low to encourage
property development, and then find themselves faced with huge infrastructure and
service costs;
- attempts in the 1970s to develop a professional public service to
provide competent policy advice and implementation support to governments were
weakened in the 1980s and abandoned altogether in the 1990s.
- Government's focus on facilitating ‘major projects’ in the 1980s through
the Coordinator General seriously undermined the more purposeful and cohesive
public sector that had been promoted through the Coordinator General's role in
the 1970s (see
The Lessons of History);
- After 1989 the Goss
Government's 'managerialist' assumption (ie that management was a generalist
function that did not require deep knowledge of what was being managed) and an
apparent autocratic desire to prevent its 'reform' agenda being subjected to
a 'reality check' resulted in (a) completely ending the Westminster tradition of a
competent and professional public service (noting that
legislation was enacted to eliminate any serious
requirement to consider professional merit in making 'senior' public service
appointments); and (b) loss of the knowledge and
skills needed to give practical effect to the long-overdue need for reform
(see Decay of Australian Public
Administration, 2002). As noted below, one result was
the creation of extremely complex and almost unworkable machinery of government;
- as a result of rapid migration to Queensland:
- economic growth was much faster than the national average. This created an
impression of economic success for years, even though the failure to diversify
into higher-productivity industries meant that per-capita gross state product
remained low by national standards;
- infrastructure backlogs emerged due to: (a) increased demand; (b) the
traditional emphasis on low taxes and funding capital spending from revenues
to minimize net debts; and (c) the crippling of Queensland's capacity to
provide infrastructure effectively (see
Defects in Infrastructure Planning and Delivery, 2002). The latter
referred to: federal fiscal imbalances; purging of relevant knowledge and
skills; fragmentation of responsibility with a view to promoting competition;
and attempts to apply market mechanisms in undertaking functions subject to
severe market failures;
- a need for large increases in infrastructure spending was perceived;
- as a result of very high rates of catch-up infrastructure spending,
combined with ineffectual government machinery:
- Queensland's economy and many people's jobs became increasingly reliant
on presumably unsustainable levels of capital spending;
- the economic and state revenue benefits of a commodities boom
driven mainly by China's unsustainably high (ie >50% of GDP) rates of
investment in property development and infrastructure has had adverse effects
on other sectors in Queensland (ie services, manufacturing, and tourism)
because of the effect on their competitiveness of increasing the value
of the $A;
- an external economic shock in 2008 (the global financial crisis)
and natural disasters in 2011 severely disrupted Queensland's economic
and jobs growth and government revenues, while requiring substantial
additional spending on disaster recovery;
- the resulting economic reversals (combined with rising costs and
perceived infrastructure deficiencies) appeared to trigger a substantial
decline in migration to Queensland, and this further amplified the state's
economic and employment difficulties because the growth previously stimulated
by high rates of migration was no longer available (see
Speculations
about Queensland's Economic Predicament).
There is nothing new about suggestions such as those outlined above, as
the potential for things to 'get bad' has been obvious for decades.
For example in
Queensland’s Challenge: A 2006 Report Card the present writer made reference to:
- a 2001 ‘report card’ that had noted:
social stresses; political instability that arose from poor management of
pressure for economic adjustment; the inadequacy of the ‘Smart State’ initiative
in promoting economic diversification; the then-uncertain prospects of resource-based
industries; the need for fundamental overhaul of government administration; and
the lack of attention by major political groups to difficult challenges;
- progress in reducing previously high unemployment
mainly due to uninterrupted global expansion;
- the continued failure to seriously
address either social stresses or economic development;
- international economic instabilities;
- the shambles in public
service delivery;
- the improving quality of inputs to
public policy debates, but the limited practicality of many products of those
efforts;
- Queensland’s enigmatic budgetary position;
- The inadequacy of Queensland's corporatisation
model for government-owned enterprises.
However a bigger problem is that 'bad' could easily become 'worse' for reasons
that gain little or no attention in public debates. Unless the collaborative
capacity of Queensland's community to anticipate and respond to
hard-to-understand risks is increased, the consequences
could be severe.
Poor Governments and Weak Oppositions
Under Queensland's system of government, the government executive is drawn from
the party with majority support in Parliament, and has two primary roles,
namely: (a) the creation of a legal and regulatory framework for activities
undertaken within the community; and (b) the provision of diverse public goods
and services (eg services involving health, education, transport, water etc). The primary roles of
oppositions are to: (a) ensure that Parliament can effectively hold the
executive government to account; and (b) potentially take over as the executive government.
The development of realistic and up-to-date policy
is a complex task requiring a lot of resources and discipline, because: (a) the
primary criteria for effective government is a depth of knowledge about how a
society operates; and (b) information from many sources must be mobilized and
appropriately used.
Policy development requires knowledge and discipline: Governments' functions (ie creating a legal / regulatory framework;
and providing public goods and services) do not solely or even primarily involve 'doing things'.
Rather they primarily involve managing the relationships between 'things'.
This is obvious
for government's role in creating a system of law and regulation which affects
how the community 'does things' (eg through sound industrial relations laws, or
regulating land use where there may be dozens of different factors that require
consideration).
It is less obvious in government provision of public goods
and services - until it is recognised that goods and services are
typically undertaken by governments (rather than by independent enterprises) because they
are affected by complexities that can't be managed through commercial
relationships. Those complexities might include: an inability to charge users
for a service; large side effects from providing the service; or potential
socially or environmentally undesirable consequences (see
Intrinsic Problems in About Public Private Partnerships).
Managing relationships requires much deeper and broader knowledge (eg about
the way a whole society or economy works) than that required to deal with
individual 'things' (eg projects).
Moreover in the development of relevant policy options there is also a need
for discipline. For example there is a need to:
- seek a balance between
practical and theoretical expertise, and between different interest groups - as
policy ideas that emerge from one area may not reflect a community
interest. This requires drawing on (say): (a) business and community organisations
who draw upon their members, and represent
their interests; (b) universities (and others) who have access to relevant theories;
(c) leading practitioners and experts who are aware of international
trends; and (d) government employees who should have knowledge of: the
practical aspects of existing programs; the many past policy initiatives
that are embodied in existing practices; and the complex interaction
between policies;
- subject 'ideas' to a reality check by those with practical experience
before policy is adopted. There are 100 'ideas' that sound good for every
10 that are relevant. If policy 'ideas' are disparaged by those with
experience, they can still be adopted - but failing to go through the
discipline of a 'reality check' before policies are finally accepted is
hazardous;
- encourage media reporting on public policy, and on the work of theoretical
and applied experts, so that the electorate is aware of operational and strategic policy issues.
Political
parties draw upon information available to their members, and from contacts in
the community. They are only likely to be up-to-date and realistic if the media is effective
in ensuring public awareness of issues, and of their complexity.
Thus reliable proposals for changing existing
practices are only achievable by organisations
that have a depth of knowledge and experience of those functions. Proposals for
change by those without such understanding (or those adopted without the
discipline of a 'reality check') are at risk of triggering unrecognised and
perhaps serious side-effects.
Thus oppositions can
only be effective (ie participate in well-informed policy debate and present
meaningful alternative policy proposals to the electorate) to the extent that
they have access to inputs of reliable policy options from external sources (eg
international precedents) or
from local civil institutions (eg
associations, research institutes, universities). Governments have another
source to draw upon in formulating policies, ie the public service. Under the Westminster tradition that Queensland inherited
from Britain, the public service was expected to be
professional and politically independent in implementing government policy and
providing informed policy advice. Its role was particularly important as a
repository of collective knowledge about the complex issues affecting particular
policies and programs, and as means of (collegially) managing the interface
between various complex functions that cannot be coordinated through market
mechanisms or social relationships within the community.
Unfortunately the policy advice available to both governments and oppositions from
Queensland's civil institutions has always been weak. In fact such entities have been notable for their ignorance of, and
lack of serious concern for, the practical requirements for ‘good government’.
The present writer's involvement in strategic policy R&D suggested that:
- there were virtually no civil institutions willing or able to provide
realistic and up-to-date advice to the state's political system about the
requirements for effective government;
- there was often a 10-15 year gap between the emergence of new policy
concepts elsewhere and their recognition in Queensland;
- the very nature of government's core role (ie 'governing', which involves
creating a framework within which others can do things) was not understood, as
government was conceived to be simply about providing goods and services (its
secondary role);.
Sources of institutional Weakness:
Weak
contributions to realistic public policy debates from local civil institutions
reflects a community that is unwilling / unable to take responsibility for
its future (see
More Competent External Support to Parliament). This apparently arises
because of:
- Queensland’s recent (ie 19th century) colonial origins and
the significant population share comprising migrants that results from
rapid growth;
- the rich natural assets that make success seem easy and encourage
manifestations of the
‘curse’ of rich natural resources, such as: (a) a significant role for
foreign investors in taking economic initiatives; and (b) a community that
looks to government mainly for benefits (rather than being concerned for what government would have to do to govern effectively);
- a typically small business / branch office local economy;
- a tradition of copying international policy precedents
An aside: Some years ago, a University of Queensland economist with a German background
(Dr Tom Riha) suggested in a personal communication that Queensland's problem was that 'there
is no people here' (ie no community that sees itself responsible
for its own welfare).
Moreover:
- given the primarily small-business and branch-office character
of Queensland's economy, there is little awareness of strategic issues or
how to manage large organisations or the economy. While many
organisations have reasonable understandings relevant to their own
operations, such knowledge does not extend to the way in which governments
or whole economic systems operate. There is thus a
tendency to encourage governments to focus on the sort of operational issues
that suit small firms (ie doing things / projects, rather than enabling things to be
done) even though these are not appropriate for leaders involved in large organisations,
in 'governing' or in developing an economy ( see
Management Gaps in Queensland);
- the combination of rich natural assets with ignorance / apathy about government
/ economic policy in the general community both: (a) creates incentives to
‘capture’ the policy process; and (b) reduces the community’s ability to counter
such efforts.
- The most obvious ‘policy capture’ consequence that has emerged from Queensland’s
history and circumstances involves and incestuous / crony-ist
relationship that has often existed between the ‘private sector’ and government (see
Dependence Characterises the Queensland Economy). Queensland’s (so called ) ‘agrarian
socialist’ economic style for the first 2/3 of 20th century seems to
have been a variety of ‘state corporatism’.
Corporatism is a style of political economy that is quite different to both
democratic capitalism and socialism (the other two major Western alternatives).
It involves the view that the means of production should be privately owned but
none-the-less be treated and act an extension of the state. State corporatism
involves an administered rather than a market economy and has a long history in
Europe and an association with fascism.
State corporatism has been given effect in Queensland not only
through ‘agrarian socialism’ but also through:
- a highly regulated economy –
noting that Queensland has many more regulations than other states;
- a strong role (via
the state Treasury) in attempts to organise Queensland business and financial
institutions in the 1980s;
- the cronyism exhibited in the 1980s (eg noting
government responsiveness to the so-called ‘white shoe’ brigade);
- the
purging of capabilities developed in the public service in the 1980s to take a more
sophisticated approach to the economy by the incoming Goss administration in the
early 1990s – even though this was contrary to the nominal policies of that
supposedly-reformist administration (see
Autocratic Ignorance Purges the Public Service);
- the corporatisation
of GOCs (as pseudo-commercial arms of government) in response the National
Competition Policy in the 1990s (as compared with their privatisation in
Victoria); and
- the numerous ongoing indications of cronyism revealed over the
last couple of decades (see
Reform of Queensland Institutions - or a Rising Tide of Public Hypocrisy?.
The apparent view that the government is the core of the economy, rather than the
regulator of the economy led to repeated assertions (led by the Treasury) that Queensland had a ‘strong’ economy because,
at one time, the
government’s financial position was strong (ie no net debts) – even though the
productivity of Queensland’s economy was very low by national standards (ie
Queensland’s gross state product / capita was about 85% of the national average,
and national per capita incomes had then declined by international standards for
all of the 20th century). Such claims (which impeded reform effects,
but benefited those whose economic prospects depended on exploiting resources or
government connections) constituted a major obstacle to the changes needed to
develop a more modern productive economy that would probably have benefited the
community generally (see
Queensland’s Traditional Economic Strategy).
- the incentive for
civil institutions to provide the policy raw material that effective state government requires
have been eroded because fiscal imbalances in Australia’s federal system have
severely impeded the ability of state governments to take real responsibility,
or be held democratically accountable, for their nominal functions (see
Federal Fiscal Imbalances). And this has been compounded because federal
governments have reacted to the resulting weaknesses in states’ performance by
seeking to micro-manage state functions centrally - a 'solution' that is likely
to be counter-productive (see
A Federal System has Important Advantages).
Concern for the requirements of effective government have been further
impeded by changes introduced since the 1980s with the aim of boosting the
performance of Australia's economy. Greater efficiency in the provision of
public goods and services was sought by the use of market mechanisms and
business-like methods that were at times incompatible with the functions of
government (see
Governing is not Just Running a Large Business). The fact that
governments have to 'govern' (as well as producing 'public' goods and services) and
what is needed for them to do so effectively has apparently been seen to be irrelevant.
Until the 1990s governments had relied heavily for policy advice on the public
service and on external sources (eg UK precedents, OECD analyses) though the
latter were not always strictly locally applicable. However since then:
Because of the unreliable support available to them from local civil
institutions and the erosion of alternative sources of policy advice, Queensland
Governments have tended to be poor, and oppositions 'myopic'.
This can be illustrated by an overly-simplistic 'history' of recent Queensland's
governments, though Queensland is anything but unique in this respect.
A simplistic overview of Queensland administrations from the recent
past:
- until the 1990s, governments held power for long periods while
oppositions were weak;
- the final
long-serving government in that era (led by Joh Bjelke-Peterson) was noted for: his ‘Don’t
you worry about that response’ to policy questions; gaining popular support on
the basis of government support for projects proposed by mainly-external investor
in Queensland’s natural assets (which as noted below is not a formula for
economic prosperity); and neglect of 1970's efforts to professionalize government machinery;.
- The Goss
administration which gained power in 1989 focused on reforming Queensland’s run-down public
sector. But its reform agenda had apparently been devised in academia and by
political advisers. Despite its populist appeal, that agenda primarily resulted in
the creation of unworkable (ie highly centralised and very complex) government machinery and a
public service from which much of the knowledge and experience needed to give real
effect to overdue reforms was purged (see
Queensland's Worst Government?). That purge, though less severe, can be
compared with the purge of all officials who knew anything about what was
required to govern after the US led invasion of Iraq, which contributed to
that country's subsequent collapse into chaos;
- An
ill-prepared Borbidge administration unexpectedly won
government in 1996 and found that it could not rely on a crippled
public service to compensate for its lack of substantive policy agenda. It commissioned umpteen inquiries in an attempt to find a way forward.
However by
the time these reported it was too late;
- The
Beattie Government in 1998 seemed determined to ‘do
things’ rather than fix government machinery, and did so. Unfortunately many
of the ‘things’ that were done were poorly considered, and some of the expenditures that eroded Queensland’s credit rating over
the next decade was wasted. And repeated crises resulted from Queensland's
still-crippled administrative machinery;
- In 2007 an emphasis on preventing (rather than merely apologising for, and promising to fix)
crisis emerged, when the current premier (Anna Bligh) assumed that office.
However the legacy of history has proven hard to overcome.
And there is nothing unusual about the poor quality of recent Queensland
governments (see
Undesirables).
Weak governments and oppositions are not limited to Queensland noting: (a) the populist but insubstantial agenda
of the incoming Rudd Government in 2007 (see
Populism Trumps Electoral
Victory); (b) concerns about the effectiveness of the present federal Government and Opposition
(see Unstable
Government); and (c)
frequent criticism of the effectiveness of other state governments.
Given these circumstances it is unrealistic to expect oppositions to be able to
express reliable policy agendas. Moreover, unless and until the quality of
policy contributions improves, any opposition that gains government in
Queensland is likely to be a repeat of something like:
- the
Goss Government, which crippled the machinery of
government and achieved little of practical relevance because it believed that
it knew it all (and thus did not need advice from those with practical
experience or feedback from the general community); or
- the
Borbidge Government, which gained government
unexpectedly and spent its term undertaking umpteen studies in the hope that
this would allow it to make informed decisions; or
- the Beattie Government, which escalated government
spending on trendy-but-often-ineffectual programs and projects, while
suffering repeated administrative crises which were typically 'solved' by
throwing a few hundreds of millions of dollars at them.
Perhaps running for government in Queensland is a little like a dog chasing a car. Anyone
who wins government, while not really knowing what to do with it, could be in as
much trouble as a dog that succeeds in catching a car.
'Building Queensland's Future - Together': A
Complex Challenge
Queensland's current Opposition circulated an
email on 6/5/11 entitled 'Building Queensland's Future -
Together' in an apparent attempt to mobilize new
energy and initiative in addressing Queensland's challenges.
Text of email received 6/5/11“Last
week in Gladstone the Shadow Minister for State Development, Infrastructure,
Planning and Reconstruction, Jeff Seeney, and I announced an urgent
investigation into Queensland’s infrastructure needs.
Over
the past 20 years, Labor has failed to plan for the future and invest in
important infrastructure and this affects us all, whether we live in cities or
regional areas. I’ve been travelling Queensland since I was elected LNP Leader
four weeks ago and I have seen firsthand the sorry state of many of our regional
hospitals, the pot-holed roads and highways that have been flooded and it is
simply not good enough.
As
Shadow Minister, Jeff Seeney has been tasked with consulting communities across
Queensland and compiling a list of key critical infrastructure needs including
roads, flood proofing measures and health facilities.
Over
the next 90 days, Jeff will be travelling the length and breadth of the state
putting together this list and I encourage Queensland’s councils, community
groups, business organisations and agriculture sector to highlight their key
infrastructure needs and have them incorporated in the LNP’s strategic
blueprint, Building Queensland’s Future – Together.
An
important point to make though is that due to Labor’s reckless financial
management the budget cupboard is bare – so there can be no instant fixes – but
with this plan we can be ready to make a practical start on Building
Queensland’s Future - Together.
You
might be interested to know that Premier Bligh was also in Gladstone last week –
announcing a gas company will fund a new renal dialysis unit and upgrade
to the operating theatre for the state government’s hospital. I believe
government, not business, should be providing this critical health
infrastructure.
A
CanDo LNP Government will ensure taxpayers' money goes to funding critical
infrastructure and the delivery of front line services, not glossy publications
and publicity stunts.”
While 'building Queensland - together' seems like a constructive idea, what
is required is far more than the Opposition seems to realize. 'Building
Queensland' is not just about providing infrastructure or taking other
government initiatives. There is also a need to build the capacity of the
broader community to cope with its opportunities and challenges, including those
that are not yet even understood.
More than a List of Infrastructure Options
Suggestions about possible infrastructure projects were all the Opposition
sought in its email on 'Building Queensland - Together'.
However soliciting such suggestions is not
likely to be particularly useful.
Why? In the first place more than uninformed suggestions (ie guesses) are usually required to identify constructive
infrastructure options, so there is a limit to what can be achieved by simply seeking public proposals for
projects. For example:
- Infrastructure typically involves
investments that have complex relationships with related (government and
private) functions and other regional facilities, as well as requiring
extensive technical / economic evaluation. Wivenhoe Dam was approved only
after six years of feasibility studies. By contrast the Traveston Dam option
for boosting Brisbane’s water supply was reportedly identified by a brief desk-top
study. However Traveston Dam may well not have been technically adequate, and political backing
for a project on the basis of what amounted to a guess seemed to result in large
public sector losses (see
Saving 'Brand Labor' from Traveston Dam?);
- Many transport infrastructure
investments in SE Queensland seem inadequate, because they were apparently
adopted on the ‘obvious’ basis of continuing traditional patterns of urban
development and styles of transport in an environment in which quite different
requirements are likely in future (eg see
Brisbane's Transportation Monster). The global ‘peak oil’ event might be a
‘game changer’ in terms of transport and urban infrastructure requirements.
However, though it is increasingly suggested to be imminent and warnings of
disruptive consequences are more widespread, its implications
have not yet been adequately analysed (see
General notes on the 'peak oil' issue). Ultimately many traditional ideas about
infrastructure and economic options may require reconsideration.
To genuinely identify and act on Queensland’s infrastructure needs,
it is likely to be more constructive to strengthen the machinery that identifies
and implements infrastructure on an ongoing basis. And, some years ago it was apparent that Queensland’s infrastructure
development machinery suffered serious deficiencies which needed attention (see
Defects in Infrastructure Planning and Delivery in Queensland, 2002).
Also 'building Queensland' does not simply require
identifying infrastructure options, even if this were done more reliably. This can be illustrated by:
- the rapidly escalating debt levels the Queensland Government faces, which
means that funding infrastructure requires hard judgements about priorities as
well as about tax levels and their social and economic impacts;
- the proposals for government initiatives to energise
the
economy in the vision presented by the Opposition in early
July 2011 were not limited to infrastructure (see above).
More than Government Initiatives
But the challenge goes deeper because 'building Queensland' does not just require
government initiatives. For example, even the goal of "making Queensland No 1" economically
arguably requires:
- that economic directions be set by the market (rather than being pre-empted
by political guesses);
- strengthening systemic supports to businesses that neither arise naturally
nor are able to be provided or organised by governments, and yet are vital for
success in addressing high value-added opportunities;
- emphasis on creation of competitive advantages (through the community's skills
and effectiveness) rather than primarily relying on natural strengths (ie
so-called comparative advantages) as the Opposition had suggested;
Explanation: as for
simply seeking proposals for infrastructure options, achieving
the 'making Queensland No 1' aspiration of the Opposition's economic vision is anything but as straightforward as
just acting on the initiatives that were suggested because:
- if the desired outcome is to be achieved, the direction that
Queensland's economic 'compass' points towards must be determined by the
market, and market requirements can't be reliably determined by the
democratic political process (see
Economic
Solutions Appear to be Beyond Politics), The latter refers to
the problem of interest group pressure, and the difficulties of acquiring
relevant information in a timely manner. This does not mean that nothing can be done, but
that the process of determining what needs to be done can't simply emerge
from democratic processes;
- what government does (eg via regulation or provision of services)
constitutes only (say) 30% of the environment business faces, and it is
both necessary and feasible to enhance 100% of the business environment in
order to make Queensland No 1 for business. Work on the role of
industry clusters has shown that as well as government's influence on the
business environment, " interconnected companies, specialized suppliers,
service providers, firms in related industries, and associated
institutions (e.g., universities, standards agencies, trade associations)
in a particular field that compete but also cooperate"
[1] are also important;
- there are complications related to the support for industries based
primarily on Queensland's natural riches that the
Opposition's economic vision refers to
because:
- those activities constitute Queensland's 'comparative advantages'
(ie natural advantages) but it was recognised decades ago that high
productivity typically required emphasis on
competitive advantages (ie
advantages created by strategy, as a result of the knowledge, skills and
organisation of the community);
- Queensland had a long term orientation to activities based on
natural assets, and this
was associated with a relatively low level of economic productivity and
community incomes (eg Queensland's gross state product / capita has long been well below
(ie about 85% of) the national average, and for most of the 20th century
(ie until the mid 1990s) Australia's national income averages had been
declining against international benchmarks);
- reliance on commodity exports is a poor economic tactic because such
industries are subject to periodic booms as demand rises, and this
induces excess investment which results in 'bust' due to overcapacity
when demand declines. And as noted below, there
is a serious risk that the commodity boom currently expected to drive
Queensland's growth will prove to have been a bubble;
- also emphasis on natural riches can lead to dominance in
business and politics by those who simply seek to gain from those
assets but provide poor economic leadership to the community (see
comments
on the 'curse' of natural resources). Resource-poor countries generally
outperform those that have rich natural assets. This does not imply that
Queensland natural assets are unimportant, but merely that if these are
the focus of attempts to strengthen the economy then: (a) the risk of
political corruption is greater; and (b) the result will be
inferior to efforts directed towards strengthening the competitive
capabilities of the community (and thus its ability to generate
competitive advantages as well as benefit from natural advantages);
- Queensland's traditional tactics for supporting business have been
ineffectual both in reliance on natural comparative advantages and in
attempts to develop competitive advantages (eg via the Smart State
program). Reasons for this are suggested in
Queensland's Economic Strategy and
Commentary on Smart State). Problems include: direct government
'assistance' services to businesses which inhibit the development of
effective industry clusters; attempts to achieve economic change through
'political push' rather than 'market pull'; and failure to implement
effective processes to stimulate the development of market-oriented industry clusters
(see
Defects in Economic Tactics, Strategy and Outcomes, 2000). In
particular there has been a traditional bias towards provision of
government 'assistance' to industry where market gaps (ie deficiencies in
the way the market economy operates) have been identified. The creation of
such 'assistance' services both politicises economic activity to some
extent, and also blocks development of the economy (ie the creation of
non-governmental options for bridging the market gaps within the market
economy itself). Methods to stimulate the latter changes are available and
would seem likely to produce better outcomes.
The aspiration of the Opposition leader's economic vision can probably be achieved. But doing so requires methods
that enable many different types of organisations to simultaneously discover
mutually reinforcing initiatives,
rather than treating the community as an audience that waits for government to
do 'things' for them.
How: Methods that could energise Queensland's economy are outlined in
Lifting
Productivity: Considering the Bigger Picture and
A Case for
Innovative Economic Leadership.
The latter suggests ways to
develop the productivity and competitiveness of the economy (or to generate independent initiatives
that address social and environmental challenges and opportunities) by
enabling accelerated learning about opportunities within industry clusters
or communities - stimulated by
organisations that operate under democratically approved protocols,
but without direct political control of outcomes.
Those methods would
also provide
Queensland's government with guidance on initiatives that allow it to play its
part in energising Queensland's economy, but resulting actions would not be
limited to what government can do.
The suggested methods would parallel those used in East Asia to engineer
economic 'miracles' but would different in that they would be compatible
with a democratic capitalist system of political economy and thus avoid the
macroeconomic distortions that arise in (say) Japan and China (see
Impacting the
Global Economy).
Thus, while the Opposition's suggested emphasis
on various economic functions (eg agribusiness; mineral and resources; and
indeed any globally-competing economic activity operated from or in
Queensland) would be of value, 70% (say) of the emphasis should be on
support to such enterprises by enhancement of the industry cluster itself,
while only (say) 30% related to what government might do (eg in terms of
regulations, taxation and services).
Likewise, in meeting social needs there is arguably more to be gained at times by
motivating and enabling individuals to help one another, rather than providing
government social services that impose ongoing costs on taxpayers and risk creating
dependency (see
Is the Smart State a Just State: A Commentary, 2003). And, as for
achieving market-oriented economic development, this requires empowering
leadership by entities that enable opportunities for changes within the
community itself to be discovered rather than create an ongoing need for
government programs.
As the above examples illustrate 'building Queensland' has to be as much about developing supportive
relationships within the community and the economy, as it is about government 'doing
things' (eg providing goods and services). The importance of building
effective relationships can also be seen by considering: the support individuals
receive within functional families and communities; and the role teamwork plays
in cohesive and efficient organisations.
Learning about the Unknown
However 'building Queensland' can not only involve
changes to existing and well-understood functions.
It must also involve addressing
‘strategic’ challenges (ie important emerging issues that have not previously been meaningfully addressed
at all, and may not yet even be well understood).
At present strategic challenges that need consideration arguably include:
- constraints on the effectiveness of Australia’s traditional system of government
due to changing circumstances (eg see
Australia's Governance Crisis and the Need for Nation Building). The latter
suggests that the requirements to create a framework in which governments in
Australia can be effective now go well beyond the institutional support than
might have been adequate 30-40 years ago, because (for example): (a)
complexity has increased, and thus generated ever increasing 'failures of
rationality'; (b) past reform efforts have had unwanted side effects that have
made governments less effective; and (c) current arrangements under
Australia's federal system seriously distort and disrupt effective government;
- the rise of 'Asia' that has made it necessary to deal with
unfamiliar social / political / economic systems;
Explanation: Australia is
increasingly influenced East Asian models for social and economic
modernisation that are based on traditions that are quite different from
those established in Australia on the basis of its Western heritage. In simple terms Australia's society works through the
creation of simplified social spaces (eg via a rule of law and reliance on money
as a means of exchange and store of value) within which individuals can make
rational decisions (as citizens, workers, employers, politicians) - see
Cultural Foundations
of Western Strength).
However East Asian societies tend to operate on the basis of quite different
traditions and social relationships - eg with an emphasis on social hierarchies
and consensus, rather than on individuals, rationality and a rule of law (eg see
East Asia in
Competing Civilizations) and
Understanding East Asia's Neo-Confucian Systems of Socio-political
Economy. There are parallels between the hierarchical and
consensual functioning of such societies and the way an effective bureaucracy
works in western societies in handling the relationships between complex
functions. To over-simplify, it might be said that in East Asia whole societies
operate as a quasi-bureaucracies.
These differences, which are by no means easy to understand, have
destabilized the established international economic order, and even though they
may well not prove sustainable, they need to be
recognised by government and the community in order to function effectively
in Australia's current environment and avoid unnecessary risks (eg see
Babes in the Asian Woods and
Comments on Australia's
Strategic Edge in 2030.
- economic challenges that arise from an uncertain international economic environment,
While a boom related to resource investment seems to be expected to drive
rapid economic growth (in Queensland and Western Australia in particular)
risks in the current international environment suggests that this expected
boom could prove to be a 'bubble'.
Economic Risks: There are serious risks to the global economy (see
also
Unstable
Environment) which have the
potential to undermine the commodity boom on which Queensland's 'good' economic
prospects in resource rich regions (and constraints in those focused on
services, manufacturing and tourism) seem to depend. In
particular:
International financial imbalances have not yet been resolved (see G20
in Korea: Unreal Optimism). Those imbalances: (a) have their
origins in demand deficits and high savings rates that are necessary to avoid
financial crises under neo-Confucian systems of socio-political-economy in East
Asia; and (b) arguably make
and global growth unsustainable. Thus the systems that currently
generate high levels of demand for Australian resources are probably also
severe constraints on global economic recovery generally (see
Economic Recovery is
Constrained by Dead Weight Economies).
Partly as a result of those systems (and partly as a result of some electorates demanding
more benefits that their economies can support) there are
general constraints on the global economy associated with high
levels of public debts (especially in Europe, Japan and US). This increases
the prospects of: (a) constraints on public spending; (b) much higher interest
rates on government bonds; (c) sovereign defaults; and (d) a
disruption of international trade (because global growth has depended on the
US’s role as ‘consumer of last resort’, and it would no longer be able to play
this role if / when high public debt levels force frugality).
The era of cheap credit is probably ending. Loose
monetary policy (ie provision of cheap credit) has been used by US and China in
particular to maintain economic growth in the post-GFC era. This has been a factor
in the emergence of the commodity boom on which Australia’s economic growth and
government revenues have become dependent (due to China's efforts to maintain growth in the post-GFC era to avoid
political instability, and also to
commodities being sought as (speculative) investments in the face of limited
opportunities elsewhere). However rising commodities’ prices are feeding
inflationary pressures, and thus making cheap credit risky as a means for
boosting economic recovery.
China's growth has become important to many trading partners
in the post-GFC era (especially Australia), yet China probably faces
structural economic problems and political instability. At one level China's
current economic challenge seems to be a property bubble (as
such investment has been a major factor in sustaining post-GFC growth and affordability constraints
have become severe).
However there are probably more fundamental but-yet-unrecognised problems implicit
in China’s version of Japan’s non-capitalistic neo-Confucian economic model (see
Heading for a Crash?). Moreover the potential for political instability in China
seems to be increasing largely because
of the incompatibility between the social equality aspiration of its nominal
Communism and the inequalities of the social hierarchies that have been the
basis of the neo-Confucian techniques used to accelerate economic modernisation
(see
Communism Versus Confucianism: The Continuing Contest in China);
- Social stresses related to: underemployment; housing affordability;
dysfunctional families (as evidenced by violence, child neglect
and abuse); drug and alcohol abuse; homelessness and the emergence of an underclass. It has been
claimed (though this is hard to realistically assess) that a ‘Third
of Qld in or at risk of poverty’ (24/5/11) – because the rapidly rising costs of
essentials puts low income earners under severe pressure;
- the potential impact of the probably-imminent global ‘peak oil’ event on:
international and regional transport; urban / regional form; and industries
(such as tourism) that depend on relatively cheap transport (see
General notes on the 'peak oil' issue).
There will, of course, be other strategic issues that need to be taken into
account - and thus a need for a process to identify, and develop appropriately
considered responses to, them.
Speculations about Curing Queensland's 'Myopia' and Mobilizing Initiative
To genuinely 'build Queensland - together' (as the Opposition suggested)
there is a need to inform, mobilize and empower many different types of organisations
(including but not only government) so that mutually reinforcing initiatives can
be taken. Doing this, and identifying what ‘building Queensland – together’ could
mean in practice, might (over-simplistically) require:
- Identifying key issues requiring
attention related to both existing government and community activities and
‘strategic’ issues, through broadly based consultation with practitioners and
experts;
- undertaking analyses of these issues
with a goal of both developing indicative plans for initiative within the community
or by businesses, and public policy options;
- ensuring that the results, and those involved in producing them, are generally accessible;
- Seeking reactions from those with relevant practical experience and
involvement, in
terms of both: (a) possible independent initiatives; and (b) a rational consensus
of views about public policy options that could be considered for adoption by
government or the opposition.
In order to allow a sense of direction and commitment to emerge it would
first be necessary to strengthen Queensland’s civil
institutions. Leadership in providing a sense of direction that does not simply
attract rent-seekers and degenerate into wealth redistribution must be provided
outside the political system. This might, for example, be achieved by:
- conducting informal or formal experiments of ways in which civil
institutions can
simulate discovery of independent initiative to address challenges and opportunities
through a form of indicative planning, as well as providing policy options for
political consideration. Though some guidance could be provided on what is
required to achieve this, undoubtedly much could be learned from experience;
- requiring the initiatives emerging from such processes to be approved
through established accountability practices (eg being commercially viable or
politically acceptable);
- democratically endorsing protocols through which this could be undertaken
on an ongoing basis;
- increasing financial resources to those operating
under such protocols, eg by: (a) exploring options for such processes to be
directly rewarding (commercially or otherwise) to those involved; or (b) providing a pool of funds from public revenues
which are directed to particular institutions on the basis of the numbers of
electors who indicate support for their activities.
It would be extremely unwise to defer practical actions required to address
existing requirements until effective civil institutions were put in place or
processes like those suggested above to systematically explore key issues were
undertaken. For example, there is a clear need in Queensland to more effectively undertake government’s role as a
regulator and provider of public goods and services.
However unless steps are taken to overcome Queensland chronic 'myopia' (and
if 'luck' does not hold) then Queensland's 'bad' situation could become much
worse.
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