INSTITUTE OF PUBLIC AFFAIRS Review.€¦ · INSTITUTE OF PUBLIC AFFAIRS Review. Winter 1983 Vol.37 No.2 COUNCIL OF THE INSTITUTE OBJECTS SIR JAMES BALDERSTONE, (President) The Institute

INSTITUTE OF PUBLIC AFFAIRS

Review.Winter 1983Vol.37 No.2

COUNCIL OF THE INSTITUTE OBJECTS

*SIR JAMES BALDERSTONE, (President) The Institute of Public Affairs is aSIR WILFRED BROOKES, C,B.E., D.S.O. (Past President) non-profit educational organisation

*J. A. LECKEY, (Chairman-Executive & Editorial Committee) financed by business enterprises andHUGH M. MORGAN, (Treasurer) people throughout Australia toSIR LAURENCE BRODIE-HALL C.M.G. study economic and industrial*PETER R. BUNNING problems. It was launched in 1943.SIR PETER DERHAMJ. D. ELLIOTT The basic aim of the I.P.A. is toD. L. ELSUM advance the cause of free business

*SIR FRANK ESPIE, O.B.E. enterprise in Australia. In pursuitSIR JAMES FOOTS of this aim it is endeavouring:A. GIBSON 1. To inform the Australian publicC. B. GOODE of the facts of our economic systemR. KEVAN GOSPER and to raise the level of economicSIR ANDREW GRIMWADE, C.B.E. literacy in Australia.J. A. HANCOCK, O.B.E. F^ .

D. M. HOCKINGu

2. To work always for a full andSIR JOHN HOLLAND ^^râ friendly understanding between

*DENYS I. McCULLOUGH employers and employees and forSIR ERIC McCLINTOCK good relations throughout industry.SIR JAMES McNEILL, C.B.E. 3. To study the means by whichW. D. McPHERSON private business enterprise can beJ. L. NAVE made to operate better in theG. M. NIALLHILTON J. NICHOLAS, O.H.E. interests of all sections of the SIR IAN POTTER Australian people.NORMAN N. ROBERTSON, C.B.E.

*PROFESSOR JOHN ROSENORMAN W. SAVAGE, A.M.R. A. SIMPSON.1. H. VALDER

"HON. VERNON WILCOX, C.B.E:, Q.C.

LIFE MEMBERS OF I.P.A.W, A. INCE, C.M.G.E. A. JONES, C.M.G.

DIRECTORC. R. KEMP, B. COM.

CONSULTANTSC. D. KEMP, C.B.E., B. COMJ. ABRAHAMI, M.A.K. BAKER, B.A.

ADMINISTRATOR INSTITUTE OF PUBLIC AFFAIRS*NORMAN D. WRIGHT, 83 William Street, Melbourne, 3000E.D., DIP. COM., F.C.I.S., A.A.S.A. Phone 61 2029

"Executive and Editorial Committee

TO OUR READERSEver-increasing taxes and excessive bureaucratic

regulation are putting an impossible burden on theproductive sector of the economy. The theme of"Big Government" is tackled by a number ofcontributors in this "Review".

From Washington well-known economiccommentator, Peter Samuel, has prepared a mid-term assessment of President Reagan's success incutting back government. Otto von Fieandt, inParis, looks at the unexpected consequences of asocialist policy initiative of President Mitterand.

The I.P.A. has argued many times in recentyears that income restraint must start at the top. Inthe commentary section of this "Review" we lookat the symbolic significance of cuts in public servicesalaries made by the West Australian Premier, Mr.Burke.

Monstrous railway deficits are a major reasonwhy Governments are finding it so hard to containtheir taxes and charges. Professor Swan and JohnNestor of the University of New South Walesanalyse the runaway deficits in Victoria and NewSouth Wales.

Articles on shopping hours and youthunemployment show up the adverse consequencesof government interference with the market.

I.P.A., with the help of prominent academic andinternational contributors, is focussing on issueswhich are dear to the heart of those who believethat the way to prosperity is through free enterpriseand smaller government.

Two other important public issues are givenattention in this "Review". Allegations of bias inthe A.B.C. have been in the headlines recently. KenBaker examines this question by reference to threeA.B.C. current affairs programmes. ProfessorRufus Davis of Monash University looks at thecriteria for evaluating Australia's Constitution.

We believe "Review" is putting views which donot receive sufficient attention in public debate."Review" has a circulation of about 21,000 copiesand we hope to expand our readership still further.You could help us by letting us know the names ofindividuals that may be interested in receiving ourpublications.

Rod Kemp,Director

Contents46 I.P.A. Committee Changes47 Editorial: Mr. Hawke and

Economic Leadership50 Senate: Protecting the People's

Purse51 Media: Slipping in One

Direction52 Public Sector Inflation53 Premier Burke's Public Service55 The Reagan Experiment61 The Interfering Itch63 IPA Booklet `Profits and

Employment'64 The Railways: Haemorrhage of

the Body Politic70 France: A Favour to the Rich72 Bias in the ABC?81 Youth: Priced out of Jobs83 Evaluating Australia's

Constitution90 Shopping Hours: Regulation

for the Many or the Few?95 Public Affairs Reading Guide

SUBSCRIBERADVICE Page 60

Contributed articles bynoted authorities inAustralia and overseasdealing with matters ofpublic interest are publishedin IPA Review. ThisInstitute is not necessarilyin full agreement with theviews expressed in thesearticles. They are publishedin order to stimulate freediscussion and inquiry.

45

Changes to the I.P.A. Counciland Committee

The I.P.A. is pleased to announce that Sir James Foots,Sir Eric McClintock, Professor John Rose, Mr. JohnElliott and Mr. Kevan Gosper have joined the Council ofthe I.P.A. Sir James Foots and Sir Eric McClintock arerespectively Presidents of I.P.A. (Queensland) and I.P.A.(N.S.W.).

I.P.A. Councillors, Mr. Charles Goode, ProfessorJohn Rose, and Mr. Gerald Niall, have joined theExecutive Committee.

A policy has been adopted whereby one-third of theCommittee will retire each year. Accordingly Mr. PeterBunning, Mr. David Elsum, Mr. Doug Hocking andMr. Norman Robertson have announced their intention toretire from the Executive Committee.

The I.P.A. thanks these Committee members for theirwork on behalf of the I.P.A. and looks forward to theircontinued contribution to I.P.A. as members of theCouncil.

46 IPA Review - Winter 1983

EDITORIAL:

Mr. Hawke and EconomicLeadership

In foreign policy Mr. Hawke has displayed leadership in trying to bring hisGovernment into line with our national interests. He should now use his considerableskills to ensure that sections of his party, the trade unions and the wider community facethe realities of our economic situation. r

The pre-eminent task of government atthis point of time is to promote therecovery of the private sector of theeconomy and to increase employment:upon this all its energies should beconcentrated. The key importance of theprivate sector in the process of recoverywas indeed recognised in the finalcommunique of the Summit. Thecommunique stated:—

"The preservation of the privatesector as a profitable operatingsector is essential to Australia'swell-being and to -encourage job-creating investment both fromwithin Australia and abroad...Toachieve the growth in GDP andemployment on which the nation'sprosperity will depend, increasedprofitability is now essential if newinvestment is to be created at aneffective level."

But until these wise and good intentionsare given expression in practical policymeasures, this essential part of thecommunique will amount to no more thana pious declaration.

Four fundamental steps are-necessary ifbusiness investment is to be stimulatedand unemployment reduced. These stepswill also help put the economy in aposition to take full advantage of the

world economic recovery, when thatoccurs.

They are:• a continuing freeze on money

incomes;• substantial tax reductions;• cuts in public expenditures;• the reduction of penalty rates,

minimum wages for juniors and ofuntenable wage supplements suchas the 17½ percent holiday loading.

By far the most important single stepthe Government can take to assist theunemployed is to remove the dead-weightburden of taxation from the community'sback. Instead, quite incredibly, theFederal and State Governments aredevoting a large part of their time tothinking up ingenious ways to increase theburden still further.

Incredibly, governments aredevoting time to thinking upingenious ways of increasingtaxes.With the economy deep in recession,

profits possibly at an all-time low andunemployment at a record post-war high,

this amounts to economic insanity. It goes

to show how remote governments and

IPA Review . Winter 198347

their armies of bureaucratic advisers havebecome from simple economic realitiesand the needs of the market place. Therecan be no strong and lasting improvementin the economy unless the enormous loadof taxation and the multiplicity ofbureaucratic regulations, which aresuffocating the economy, are reduced.

Mini-budgetFar from going any way toward

meeting this need, the "Mini-budget" didprecisely the reverse. The reduction of theprospective budget deficit was achievednot so much by cutting expenditure as byimposing still further tax increases. Wherethe "Mini-budget" was directed atexpenditure, the cuts were made in thehighly controversial area of pensions andsuperannuation, but with the glaringomission of the outrageous andinsupportable retirement benefits enjoyedby politicians and public sectoremployees. (In the last three years overhalf of public service pensions weregranted on grounds of ill-health(invalidity)). No government will gain thetrust and confidence of the people untilthe totally unjust discrepancy betweenpublic and private sector retirementprovisions is removed: nor will it deserveto. The discrepancy demonstrates, in asingle glaring instance, the extent to whichAustralia has become a bureaucraticdominated society.

The incontestable argumentsfor reducing taxes should beobvious, but they do notappear to be to those ingoverment circles.

The incontestable arguments forreducing taxes should be obvious but as

they do not appear to be so to those ingovernment circles, they will be set downbriefly here.

Reducing taxesFirst, lower taxes are necessary to

increase market demand (and thusemployment) — as distinct from theartificial stimulus to demand from moregovernment spending.

About the last thing the ailingprivate sector needs at themoment is any kind of controlover its prices.

Second, lower taxes will contribute tothe containment, if not the reduction, ofbusiness costs, assist the all-importantneed for strengthening Australiancompetitiveness at home and overseas,and encourage business.

Third, lower taxes are necessary to takesome of the heat out of the economicallydestructive demands for higher incomes.

In a nutshell, reduced taxation is anindispensable ingredient of the medicineneeded to revive the ailing private sector.

The other inescapable pre-condition ofeconomic recovery is a continuation ofthe wages and incomes "freeze" until theend of 1983. The Government, hasindicated a willingness to support someincrease in wages before the ArbitrationCommission and is perpetrating an evengreater folly by lending its weight to anearly return to the absurd system of wageindexation -- a proven recipe for self-perpetuating inflation. It is frequentlysaid -- and not only by the Government— that it is unreal to persist with a freezeon incomes until the end of the year. That

48 IPA Review - Win tar 1983

may be so. But it is even more unreal tocontemplate wage increases while theAustralian inflation continues to faroutstrip that of our main overseascompetitors. If Australia is to derive fullbenefit from the world economic recovery— which now appears to havecommenced — Australian costs must bemade as competitive as possible withworld costs. This indeed is the whole nubof the matter.

In addition, in order to promoteemployment among those most in need —the youth of the community — penaltyrates and minimum rates for juniors needto be reviewed. For too long now,governments and economists haveignored a basic tenet of classicaleconomics — that is, the relationshipbetween the demand for labour and itsprice. There is no doubt thatunemployment could be significantlyreduced if young people were allowed towork for wages which they and employerswould find quite reasonable.

Economic revivalOne counter-productive aspect of the

Summit was the agreement to institute aprices surveillance authority. About thelast thing the ailing private sector needs atthe moment is any kind of control over itsprices: nor does it need an additionalbureaucratic authority on top of themultitude that already exist. Not thatprice control or price surveillance, call itwhat you will, is any good at any time. Ifwe haven't learned this by now from the

economic history of the post-war period— will we ever learn it?

Mrs. Thatcher's greatachievement is that she hasgone some way towardsobtaining acceptance of basiceconomic realities by theBritish people.

If the Hawke Government is to achievean economic revival it must somehowbring the Australian people back to earth.The simple economic truths underlyingprosperity need to be stated and re-stated:that wealth is not a Heaven-sentdispensation, that it is created out of thehard work, enterprise and ingenuity of thepeople themselves, not by governmentsand politicians and their big battalions ofbureaucrats; that standards of livingcannot be improved by passing laws or byincreasing welfare benefits which wecannot afford, but only by the efforts ofthe people themselves. The curse of ourtimes is "big government" and whollyexcessive bureaucratic interference in ourlives.

Mrs. Thatcher's great achievement isthat she has gone some way towardsobtaining acceptance of these simplerealities by the British people. A nationthat refuses to confront the oftenunpleasant facts of life is doomed tosecond-best, to wallow despairingly in themess of its own making. Australians arenot like that: all they need is leadership,and the right policies.

IPA Review - Winter 1983 49

I.P.A. Commentary

Senate: Protecting thepeople's purse?

The overwhelming desire of Australiansfor an easing of the tax burden hasstruggled to find a satisfactory politicalexpression. All parties have responded tothe cry for lower taxes in their electionpromises. But, in government, pressuresfrom the bureaucracy and vested interestshave meant that political parties havetended to give greater emphasis tospending, rather than honour pre-electiontax-cutting commitments: benefits tospecial interests are concentrated andvisible, while the costs to taxpayers arewidely diffused and often invisible.

The bias of political systems towardsgreater public spending seems endemic inmost Western democracies. In the U.S.there has been a major constitutionaldebate on how to correct this bias (thebalanced budget amendment), but inAustralia, even those in the Liberal Partywho are concerned with constitutionalissues, have failed to make this imbalancein our system a matter for constitutionalconsideration.

Nevertheless the position is not entirelywithout hope. There are indications thatAustralia has within its Constitution aninstitution which, given appropriate partyrepresentation, can respond to the desiresof the tax-payer for reduced taxes. Theinstitution is, of course, the much-criticised, much-abused Senate.

The Senate has become increasinglyprominent in barring the way towardshigher taxes. All political parties in recentyears have acted to strengthen this aspectof the Senate's role. At the start of the

'seventies Senator Murphy (ALP) went topains to emphasise the Senate's right toreject money bills. The 1975constitutional crisis exercised this right. In1981 the present Attorney General,Senator Evans, spoke strongly in defenceof the Senate's right to oppose some ofthe proposed increases in sales taxes.Recently, the Democrat and Coalitionparties have voted down revenuelegislation. , The Constitution itselfprovides for this checking role by refusingthe Senate the right to initiate money billsbut giving it the right to throw them out.

The increasing public support for theSenate may well be linked to theprominent role this Chamber has taken inrejecting some of the proposals for newtaxes coming up to it from the lowerhouse.

Professor Don Aitkin, in his book,Stability and Change in AustralianPolitics, reports the results of nationwidesurveys of public attitudes conducted in1969 and 1979. In 1969 a bare 51 percentof people positively wanted the Senateretained and 35 percent had no opinion atall about what should be the fate of thisaugust institution. Ten years later therehad been a clear increase in support forthe Senate. 60 percent now wanted itretained; the number with no opinion hadfallen to 22 percent.

Professor Aitkin's studies also throwlight on changing attitudes to taxation. Inboth surveys he asked people to choosebetween reducing taxes or spending moreon social services. In 1969, before thewelfare explosion of the 'seventies, 71percent supported more welfare spendingand only 26 percent tax cuts. By 1979 thepicture had dramatically changed = only36 percent preferred more welfarespending against 59 percent who wanted


tax cuts. Clearly there was a feeling thatthe "welfare boom" had gone farenough.

The Senate, unencumbered bybureaucratic advice, has listened to thetaxpayer and acted. State upper houseshave sometimes been able to do the same.No wonder governments want to weakenand get rid of the upper houses: and nowonder the people want to retain them!

The Media: Slipping inone direction

The clash between theory and reality isparticularly evident in the field of mediastudies.

Frequently in media textbooks we findtheories built on the assumption thatbecause the media are predominantlyprivately owned in Australia they mustinevitably be biased in favour of privateenterprise, political conservatism, theestablishment and so on.

As the title of Humphrey McQueen'sbook Australia's Media Monopoliessuggests, the most important questionabout the media for McQueen, is whoowns them. Once that is answered itfollows, according to the author, thatAustralia's media will have an insidiousbias towards defending the interests of acapitalist ruling class.

Another variant of this view is put byHenry Rosenbloom in Politics and theMedia. "It is virtually impossible,"Rosenbloom writes, "to distinguish wherethe media's self-interests end, and wherethe establishment's self-interestsstart.... the power of one is the power ofthe other". Rosenbloom then sets out toexpose an alleged conservative bias in themedia and its links to corporate interests.

But how relevant to an analysis ofmedia bias are assumptions such as these?Recent articles suggest that we ought topay more attention to other factors, suchas the values held by journaliststhemselves.

David Bowman, a former editor of theSydney Morning Herald, points out thatnewspaper proprietors simply do not havethe control over the content of theirnewspapers that they once had. Bowmanbelieves that the increased independenceof journalists has benefited the politicalLeft. A case in point is the media coverageof the last Federal election. "Even if(proprietors') enthusiasm for Mr. Fraserhad been unbounded," he writes, "it isunlikely that they could have made theirnewspapers reflect it."

Although Bowman believes that thePress coverage of the campaign achieveda rough balance ("The gallery's shameless(ALP) partisanship of 1972 did teachsome lessons"), he believes that thesympathies of journalists "are most likelyto be with the Labor Party, whatever theircommitment to the professional middle."

A similar view of the political values ofjournalists was put in an article in "TheWeekend Australian" prior to theelection, in which the author says of hiscolleagues on the campaign trail, "Mostof them hope profoundly that Fraser willlose, largely because they are Laborsupporters since university days....."

Interest in the political culture ofjournalists is not confined to Australia. AU.S. study published in The PublicInterest (Fall 1982) focused attention onthis question. The authors interviewed240 journalists from America's mostinfluential media institutions — includingits major newspapers and televisionnetworks. For the purpose of


comparison, interviews were alsoconducted with a sample of executivesfrom America's leading companies. Theresults indicate a pronounced left-wingbias among journalists — to the left notmerely of businessmen, as one wouldexpect, but of the general public. Theauthors summarise their results:—

"On economic issues they (journalists)are well to the left of businessmen.Although most are not socialists, theystrongly sympathise with the economicand social policies developed by the left-wing of the Democratic Party during the1960s and 1970s. They are also suspiciousof and hostile toward business, are farmore critical of American institutionsthan are businessmen, and are much moresympathetic to the 'new morality' thatdeveloped in the 1960s."

Most journalists in Australia, as inAmerica, would recognise theirprofessional obligation to remain asobjective as possible in the reporting ofnews. Bias, however, is often unconsciousand not easy for journalists themselves todetect, particularly when their politicalvalues are widely shared by colleagues. Asone former managing editor, quoted inthe U.S. study, notes:---

"Even though these people areprofessional, there's bound to besome slippage. The real problem iswhen they're so politicallyhomogenous the slippage will bemostly in one direction."

Public SectorInflation

Increasing State and Federal taxes andcharges pose a major threat to thecontainment of inflation.

Governments throughout Australia arefacing serious budget difficulties. Theyare seeking, for the most part, to solvethese problems by increasing theirrevenues rather than by taking theeconomically responsible route ofreducing expenditure (although thePremier of Western Australia, Mr. Burke,as we discuss below, has taken someimportant `symbolic' cost-cuttinginitiatives.)

Already prices in the public sector arerising at nearly twice the rate of the pricesof goods and services in the private sector.

Over the twelve months to March 1983public sector prices rose by over 18percent, while private sector prices rose byonly 10 percent.

In order to compare price trends in thepublic and private sectors the L.P.A. hascalculated two consumer price indexes,based on the latest Australian Bureau ofStatistics data. One is for goods andservices whose prices are determinedmainly by the public sector; the other forgoods and services whose prices aredetermined largely in the market place.

Through steep increases in charges bygovernment authorities and in specifictaxes, governments themselves —Federal, State and Local — are addingsignificantly to Australia's high inflationrate.

In fact, since 1980-81 selected State andLocal Government charges (for exampleelectricity, water and sewerage) have risenby a huge 54 percent. This compares witha 25 percent increase in consumer pricesoverall during the same 21 months period.

The assumption that governments andtheir authorities can automatically indexprices and charges in line with inflation iscontrary to the spirit of the Economic


Summit; it imposes additional costs onprivate industry and individuals and willhelp lock Australia into a high inflationeconomy.

The discrepancy between the public andprivate sector price trends is in fact largerthan the figures suggest, since some of theprice increases in the private sectordirectly result from government action.

For example, the 2 th percentage pointsincrease in sales tax introduced in the lastFederal Budget contributed to priceincreases in many items originating in theprivate sector. Other increases in taxesand charges which would havesignificantly affected private sector pricesinclude payroll taxes and energy prices

Expenditure on `public sector goods'accounted for only 18 percent ofconsumer expenditure but made up nearly30 percent of the price increases in thepast twelve months.

If Australia's menacing inflation is tobe successfully combatted, governmentsmust set a positive example of restraint byputting their own house in order.

Premier Burke's publicservice

The cuts in some public service (andparliamentary) salaries, and reductions inpublic service employment, imposed bythe West Australian Premier, Mr. Burke,will produce only limited budgetarysavings. However, his action has greatsymbolic significance.

Mr. Burke has asserted two importantprinciples, one of economic equity, andthe other of public finance. First, thecosts of the recession should be sharedbetween the public and private sectors —

not by the latter only. Second, controllingpublic service outlays is an essential policyfor a government wishing to contain StateBudgets. (Public sector wages and salariesaccount for some two-thirds of the States'current expenditures.)

Needless to say these two principleshave been more honoured in the breachthan in the observance by Australiangovernments in recent years.

In terms of employment, private sectoremployees have carried practically the fullweight of the recession. In the last yearover 110,000 jobs have been lost in theprivate sector. New South Wales andTasmania have been the onlygovernments to reduce public servicenumbers. In Victoria, by contrast, therehas been an extraordinary increase in thenumbers employed in the public service -about 8,000.

In a period of low profitability andstagnating demand, the policy ofincreasing taxes and charges to protectgovernment employment and servicesinevitably has the effect of reducingemployment in the private sector.

Premier Burke, runs one of the largestpublic services in Australia (relative to theworkforce). But the problems he hasidentified are nation-wide. According tothe O.E.C.D., Australia has one of thelargest public sectors (as a percentage ofthe workforce) among major WesternCountries. (Tables 1 & 2). We may alsohave one of the most costly.

A study carried out by the O.E.C.D. inthe mid '70s indicated that the averageearnings of public sector employees inAustralia exceeded the average earningsof private sector wages and salary earnersby more than in any other countryexamined. (Table 3). It appears that since

!PA Review - Winter 1983 53

then the earnings advantage of the publicservice may have been somewhat eroded.However, this (relative) loss should beoffset against the improved public servicesuperannuation introduced in 1976.

In view of the high priority given bygovernments to improving teachers'salaries and conditions, it is of interestthat a study prepared by the Union Bankof Switzerland shows that in Australiateachers are better remunerated relative toprivate sector employees, such as toolmakers, than in other major industrialcountries.

There may be sections of the publicservice - the most senior levels - whichare paid less than their counterparts in theprivate sector.

Nevertheless, it is indisputable thatgovernment employment andgovernment-funded employment (notablyin the health and education areas)provides relatively large numbers of jobsfor higher paid professionals andrelatively secure employment. (See JobCreation Programmes for the MiddleClass "I.P.A. Review" Autumn 1983).

It is time that more attention was givento helping the unemployed `tool-maker'and his colleagues in the private sector.One important way governments canprovide this help is by holding down taxesand charges. Premier Burke, along withgovernments in other States certainly hasnot achieved this goal.

But if State taxes and charges are to beeventually contained, government costswill have to be cut. Mr. Burke hasprovided a public service in focussingattention on the cost of the public service.

TABLE IState Government Employees(% of State Labour Force)

Western Australia 18.7New South Wales 14.8Victoria 15.0Queensland 15.6South Australia 17.4Tasmania 19.3

TABLE2General Government Share in Employment

(%)

Australia 25.4Denmark 28.1France 15.1Germany 14.9Italy 15.1Japan 6.6Netherlands 14.9United Kingdom 21.7United States 16.7

Note: Includes Federal, State and LocalGovernment

Source: O.E.C.D. Observer, March 1983

TABLE3Ratios of Public to Private Sector Earnings

Public PrimaryEmployee: School

Private Teacher:Employee (1) Tool Maker (2)

Australia 1.63 1.43Denmark 1.17 .98France 1.24 1.05Germany 1.31 1.02Italy 1.28 1.23Japan N/A 1.12Netherlands 1.51 1.18United Kingdom .93 1.20United States .99 .78 - 1.1

Source: (1) O.E.C.D. Public Expenditure Trends,June 1978

(2) Union Bank of Switzerland. Prices andEarnings around the Globe September1982.


The Reaganby Peter Samuel *

ExperimentHas President Reagan's performance matched his rhetoric? A well-known

Australian political and economic commentator, Peter Samuel, has given the Presidenta pass mark on the results to date.

* * * tit

Before the end of the NorthernSummer, President Reagan is expected toanswer the big question: 'Will he run for asecond term?' His answer is generallyexpected to be "yes".

Mr. Reagan stands head and shouldersabove other politicians in America, bothRepublican and Democrat. And if theeconomy continues on its recent trend, thepresent odds favours his re-election overhis Democrat rival.

If Reagan does get back and run asecond term, it may be said that the"Reagan Experiment" has been a successin a political sense. But politics is a trickybusiness and Reagan in office is a verydifferent man from Reagan the candidatefrom which so much of his foreignperception was derived. Judged againsthis promises as a candidate, PresidentReagan has a patchy but by no means anunimpressive record.

• to get Government out of the hair ofbusiness and individuals bywidespread 'deregulation'.

• to eliminate the budget deficit.

Judged against these campaignpromises, the Reagan experiment mayjust get a 'pass', though differentèxaminers' would probably give differentmarks. As of mid-1983 this examinerscores Reagan:

Defence — 75%Inflation — 95%Government Growth — 35%Tax Cuts — 65 %Deregulation — 60%Deficit — Zero%Total 330/600

Defence recordMr. Reagan was elected President

largely because of the humiliation ofAmerica by the Ayatollah Khomeini. All

Six promisesanalyses of public opinion snow that itwas President Carter's weak handling of

Going back to 1980, candidate Reagan the seizure of U.S. diplomats in Iranpromised essentially six things:— which denied him the opportunity for a

• to make America strong and second Presidential term. On top of therespected again on the international fiasco over Afghanistan, when Carterscene. admitted he had completely mis-

• to stabilize the U.S. dollar by doing understood Soviet intentions and hadaway with inflation, been misled by Soviet leaders, there was

• to reverse the growth of an on-off attitude to long term strategicGovernment. - weapons systems — cancellation of the BI

• to cut taxes and, by 'supply side' Bomber and prevarication over Cruisestimulus of the private sector, revive missiles and the MX, followed (aftereconomic activity and investment. Afghanistan) by the announcement of the

'Special Washington Correspondent, News Limited, Peter Samuel, was formerly the economic editor of theCanberra Times and a correspondent and columnist for The Bulletin for fifteen years.

IPA Review- Winter 1983 55

ambitious but unfunded rapiddeployment force for protection ofWestern supplies of oil in the PersianGulf.

....balancing of the horrifyingSoviet Arms build-up...with awillingness to explore armscontrol arrangements.

President Reagan's defence record ismuch better, even though it falls short ofwhat conservatives and many Defenceand Foreign Affairs specialists hereconsider is needed in response to therelentless and massive Soviet militaryexpansion. American brilliance inelectronics and miniaturization are beingexploited in the rapid production of long-range Cruise missiles, as a retaliatorydeterrent to the Soviet first-strike SS-18and SS-19 ICBM Force. Soviet backfirebombers are at last being matched byproduction of BI Bombers. The decline inthe U.S. Navy has been reversed and newwarships promise that U.S. navalsupremacy will be retained. The U.S.Army, Marine Corps and Airforces are allat a much higher state of readiness and,while being only modestly increased innumbers, are being improved in quality ofequipment and manpower.

The Reagan defence and internationalaffairs record has been less impressive inother areas. There has been utterconfusion and two years more delay overthe MX missile, a belated and probablyill-conceived response to the Soviet SS-18and SS-19 monster rockets. In rathertypical American fashion, however, thedrawn-out processes of administrationversus congressional "ping pong" seemnow (May 1983) to have produced asensible resolution of the problem and a

political consensus in favour of buildingMX in transitional numbers whiledeveloping a more stabilizing"midgetman" missile for the 1990s.There seems a reasonable prospect ofsimilar consensus-building on ElSalvador and arms control issues and fora reasonable middle path to be developedin NATO defence matters — where thereneeds to be some balancing of thehorrifying Soviet arms build-up withconstant reaffirmation of willingness toexplore for arms control arrangements.

U.S. Middle East policy remainsmisconceived, over-emphasizing the so-called Palestinian issue, which is more asymptom than a cause of Middle Eastproblems. Unnecessary stress has beenplaced on the alliance with Israel by sillycriticism of its action in Lebanon, but theshared interests of these two natural alliesare now reasserting themselves. Therelationship is self-correcting. Reagan'sforeign and defence policies will continueto get a bad press, because the media areessentially hostile to his moves for areassertion of Western power. The time tobe worried about the direction of U.S.defence policy will be when it gains pressplaudits.

The triumph of the Reaganexperiment is undoubtedlyinflation.... the greatestfailure is the explosion of thedeficit.

Non-existent inflationThe triumph of the Reagan experiment

is undoubtedly inflation. As of the Marchquarter 1983, U.S. inflation is virtuallynon-existent. The producer price indexhas actually been declining, and theconsumer price index shows no consistent

56 IPA Review. Winter 1983

upward trend. Continuing high interestrates on long-term securities are areflection of scepticism about how long-lasting is the suppression of inflation.

And there we have the greatest failurethe Reagan experiment — an explosioninstead of a shrinkage of the budgetdeficit. A $50 billion deficit of PresidentCarter's, that was to be eliminated in twoyears, has grown to a $200 billion deficitthat shows no early promise of reduction.Civilian expenditures have continued togrow in real terms, instead of contract.That has occurred for different reasons.The very largest civilian programme —"social security", or age pensions inAustralian terms — has been treated assacrosanct. Major Federal Healthprogrammes for the poor and the agedhave been treated similarly lightly andcontinue to grow at double digit rates too.Attempts have been made to reduce theceiling levels or phase-outs of variouswelfare programmes, attempts whichhave allowed political opponents to labelit heartless and unfriendly to the poor anddisadvantaged. Some such attempts havebeen frustrated in the Congress, othershave been implemented. Some have beensuccesses in that it has been demonstratedthat those who have lost handouts werenot needy, but greedy. In other cases, thefairness of the cuts is unquestionable.Public service cuts

Federal Government employment hasbeen cut, and many programmes andagencies cut back. For example, almost allsubsidization of "alternative energy"projects has gone, and the EnvironmentalProtection Agency has had its staff cut bya third, by 3,000. The U.S. Civil Servicehas rather little self-protective power, atleast in comparison to British-style careercivil service, such as exists in Australia.That is because the senior and middle

level management is largely temporary,rather than tenured. In the U.S. some3,000 senior and middle level positionschange with each new administration andare traditionally political appointments,understood to be for the term of theadministration. These `term managers' ofgovernmental departments and agenciesare far more willing to see the wholesaledismantling of civil service organizationsthan the career civil servants whodominate British-style bureaucracies.

There are of course lobby groups foralmost every Government programme,outside Government as well as inside it.And while the inside lobbyists in the U.S.are weaker, because they are regularlydecapitated, those American lobbyistsoutside Government have developed thearts of trading favours to unparalleledheights. Washington probably has asmany full-time political lobbyists as allother democratic capitals put together.There are trade associations for everycommercial interest, organizations forevery cause and political actioncommittees ("pats") for every campaignsubject. The division of Governmentbetween the executive and the legislativearms, together with the complex system ofreview by committees, gives the lobbyistsenormous scope for practising theirprofession. That is because, in essence, nocause is ever completely won, or foreverlost. There are always ways, in thebyzantine system of Congressionalcommittees, of reviving an apparentlydead cause, or thwarting an apparent faitaccompli.

Eliminating 'fraud', waste andinefficiency was one of the well-intentioned but naive campaign cries ofthe Reaganites. In one or two areas theycan cite some success but overall therecord is thin. Workfare, the requirement

IPA Review. Winter 19E3 57

that able-bodied adults without childrenwork to earn a welfare handout, hasproved successful in places (andunsuccessful in a few) — success beingmeasured in the elimination ofmalingerers from the welfare payrolls andthe gaining of some marginally usefulwork.

Real defence spending increasesGreater efficiency in defence spending

has not obviously been achieved. That ispartly because it is very difficult tomeasure such efficiency. Multiplication ofdefence programmes — for example,having both the Airforce and the Navydevelop separate fighter planes, orordering a General Electric as well as aPratt and Whitney engine for the F16 andF15 planes may increase unit acquisitioncosts but be justified in terms ofcomplicating the Soviet effort atdeveloping counter-measures, in terms ofengendering healthy competition on priceand quality, and in terms of developingindustrial expansion capability. Acombination of different weapons'systems directed to the same objectivemay be an efficient defence, because ofthe problems they create for the adversaryin developing counter-measures.

The Reagan experiment maywell prove....that a politicaldemocracy is structurallyflawed towards an inexorablegrowth of Governments.

So the Reagan administration's pursuitof parallel systems is not in itself anindication of defence inefficiency and canbe the opposite. Still, the administration'spursuit of real defence spending increasesin the range of five to ten percent annually

has made it impossible to contain theoverall growth of Government, withoutpolitically difficult reductions in civilianexpenditures.

The Reagan experiment may well provecorrect those `Public Choice' scholars(like Mancur Olsen, Gordon Tulloch andJames Buchanan) who say that politicaldemocracy is structurally flawed towardsan inexorable growth of Government.That is because interest group politicsenables those with a concentrated interestin a particular Government expenditure,protection or regulation to defeat thebroad public interest, which is almostinvariably served by denying the interestgroup privilege. The problem is one of aconcentrated, highly-felt interest- for afew, with a strong incentive to lobby andpolitic, versus a broader public bearingthe cost of that particular privilege quitelightly. So privileges pile on privileges,and the accumulating costs become hugeand gum up the beneficient working offree markets. Mancur Olsen has written amost interesting book, elaborating thisthesis and its implications — `Progressand Poverty'.

Mixed performance on deregulationThe Reagan experiment also promised

extensive deregulation, and again theperformance has been mixed. Inenvironmental matters virtually nothinghas been done to roll back the tide ofregulations swamping industry. Theenvironmental movement has been almosttotally successful in maintaining the cleanair and clean water laws unamended, evenwhere the case has been made that aspectsof those laws fail all cost-benefit testslamentably. In trucking, unions andindustry, lobbyists have slowed the paceof deregulation.

58 IPA Review - Winner 1983

Extensive deregulation waspromised but performancehas been mixed.

In banking, broadcasting andtelecommunications, deregulationproceeds rapidly. Braking house entryinto national banking via money marketaccounts forced rapid deregulation forbanks. Broadcasting is virtually free ofregulation, and licences are being grantedmore liberally. Fear of misuse ofmonopoly powers has for the most of thiscentury been used to justify regulation ofthe telecommunications of America,dominated as it was until recently by Bell(AT + T) on the telephone side and byWestern Union in telex. The oldmonopolies are now in the process ofirrevocably being destroyed by theopportunities of the new technology andthe entry of competitors to all theestablished companies. Bell's divestitureof its local telephone service will leave itwith only its longlines ('trunk' service inAustralian usage) and equipmentdivisions. All local service will beprovided by hived-off regionalcompanies, which will deal equally withAT + T, MCI, SBS, ITT and otherlonglines competitors. Distance telephonyis already highly competitive because ofmicrowave and satellite technology andthe mispricing by Bell of distance (trunk)calls. Locally, service promises to becomeincreasingly competitive with mobile"cellular" radio-telephone andmicrowave phone companies beingallowed and encouraged by the FederalCommunications Commission.

Airline deregulation was irrevocablyunder way before the Reaganadministration came to power. The newGovernment could have responded to the

1981-82 recession and the seriousfinancial difficulties of some airlinecompanines by re-regulation. Howeverderegulation has been such an obviousboon to travellers, and gives airlinemanagement so much flexibility, therewas really no constituency working for reregulation. President Reagan's success incrushing the illegal strike by the 14,000 airtraffic control unionists in mid-1981 -they were all fired and the unionbankrupted — meant that airline unionswere in no position to lobby for specialprotection. It also probably discouragedunion militancy and paved the way formany rounds of negotiated wage-cuts andrelaxation of work rules in return for job-savings and profit-sharing.Regulation of oil and gas

The greatest triumph of deregulationhas been the freeing of oil and oilproducts from Government control. Inone fell swoop the paraphenalia of importlicensing, quotas and price controls wasdone away with in early 1981. The OPECcartel never recovered from therestoration of a free oil market in the U.S.petrol prices are around a dollar a gallon(25c/litre) compared to $1.25 beforederegulation. The remnants of the Nixon-Ford-Carter systems of price and wagesurveillance were also abolished overnightwith virtually no controversy and obviouseconomic benefit.

An area of no-progress has beennatural gas, a resource of enormousimportance and great potential, but whichhas been stymied for two decades now byregulation. The lesson of oil, strangely,has not been learned for gas. Railwaysand busline deregulation proceedsalthough the railroad industr y, ironically,having benefited from deregulation itself,has successfully lobbied for regulations toinhibit its competitor — the slurry


pipelines. On the trade protectionismfront there has, broadly speaking, beenlittle change during the Reagan term.Since most of the pressures have been forprotectionism, free traders can count thatas a blessing.

Taxcuts? The first instalments ofPresident Reagan's 25 percent personalincome tax cuts were heavily offset byinflation but now that prices are stable,the final instalments will have realbenefits. The tax structure is slightly less'progressive' than before which, whileraising egalitarian ire, will eventually havebeneficial incentive effects. The same canbe said for faster investment write-offs.

Reaganism has sometimes been

described synonymously with supply sideeconomics, which was described as a'failure' even before any of its elementshad been applied. Some of its morezealous and Utopian followers helpeddiscredit it by claiming it as a short-termsolution to the economy's woes. If supplyside economics means less taxes onincome-earning, savings, investment andrisk-taking — less levelling — then it hasgreat promise, but may take a long time,at least as politicians measure time, toproduce results. It is yet unclear how farthe Reagan Administration will go inimplementing supply side economics.

It has made a small start only.

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The Interfering Itchby C. D. Kemp

These days there is no shortage of people only too ready to interfere in the affairs ofothers. Some are prepared to spend a great deal of time and money in telling theirfellow humans how they should live their lives. The nature and extent of thisinterference are such that it now threatens to become a national menace.

Many of us find it hard enough tocontrol and direct our own livessuccessfully without feeling we are in anyway equipped to control those of ourneighbours. The growing army of busy-bodies, however, has no compunctionabout invading the privacy of others andtheir freedom to decide for themselveshow they will spend their money ordispose of their property. Behind thisinterfering itch is the inexcusably self-righteous attitude that "we know what isgood for you better than you knowyourself."

Take the campaign against smoking!There seems little doubt that smoking isbad for health. But the opposition tosmoking has taken on almost a religiousfervour. It is one thing to point out toothers the hazards of smoking. It is quiteanother to pursue the opposition to suchlengths that many call for a total ban onadvertising, and some even on themanufacture of cigarettes.

The recent stupidity of Smoke-Out Day(sponsored by the Victorian Government)was an example of unwarrantedinterference with individual freedom ofchoice. To educate people in the dangersof smoking is one thing: to subjectsmokers to the kind of absurdharassments suggested in the campaign isa reprehensible and undemocratic use ofthe machinery of government.

If smoking is bad for health, so are a

hundred other things — apparently saltand white sugar, to take two homelyexamples. If a steep increase in exciseduties on tobacco is justified todiscourage people from smoking (asproposed by some doctors) then it mightbe equally logical to impose a similar taxon salt. But who would stand for that?One of the greatest killers, particularly ofyoung people, is the motor car but no onewould suggest that the advertising andproduction of cars should, therefore, beprohibited.

Probably far more ultimate damage tohealth is caused by over-eating or over-drinking (short of "alcoholism") thanfrom smoking, but there is no sign ofsocieties being formed to try to prohibitthe promotion of foods and alcohol. Noone, for instance, has suggested that abottle of beer should carry on its table,"Beer is a health hazard." Yet we haverecently been told that as little as twobeers as day causes irremediable damageto the brain.Interfering busy -bodies

The commonsense of the matter is thatanything done to excess is harmful, and ifthe individual is unable or unwilling toexercise moderation then he must beprepared to suffer the consequences. Butthat is his business and no one else's. Evenexercise, taken in excess, may be muchworse in its effects on the personconcerned than no exercise at all. Sport isgenerally recognised as being good for


physical and mental health, but too greata concentration on sport may be just asbad for one's development as a humanbeing than no sport at all. Pretty welleverything in life is a matter of degree."Moderation" is a golden rule in allthings -- even, let it be said, in the wayone holds one's opinions.

If an individual is unable orunwilling to exercisemoderation, then he must beprepared to accept theconsequences. But that is hisbusiness and no one else's.

The interfering busy-bodies are, ofcourse, active in many other fields of lifebesides smoking. No one would deny, forinstance, that the conservationists or"greenies" have a reputable cause, but bypushing their ideas to absurd lengths, theyhave given rise to a backlash and broughttheir cause into disrepute. In manycountry areas the conservationists havebeen successful in preventing people fromcutting, or even lopping, trees on theirown properties without permission to doso. The loss of some homes in the recentVictorian bushfires has been attributed tothe fact that owners were prevented fromremoving trees they considered to bedangerous in the event of fire. Taken tothese lengths, conservation becomes anunwarranted interference with personalfreedoms and sometimes even a danger tolife.

The protection of wildlife andthreatened species is another case of aworthy cause — one which everyonewould support — sometimes beingpursued to excess. There are those whowould totally disallow the farmer's rightto shoot kangaroos (there are said to be

some 30 million of them in Australia) onhis property despite the depredations theycause to fences, crops and feed fordomestic animals. The white cockatoo, ofwhich there are enormous numbers,which can wreak havoc on crops, isanother protected species. When farmerstake measures to reduce their numbers, ahowl of protest goes up from the wildlifepreservationists — living mainly, it shouldbe said, in suburban areas and inignorance of the real problems facing theman on the land.

A further example of inexcusableinterference in the lives of others isprovided by those who would prohibit thedestruction, or even alteration, of anybuilding they consider to have significanthistorical associations. The preservationof Australia's historical heritage is,without question, an estimable and evennecessary goal with which no one wouldsurely disagree. But those active in thisfield should stop short of interferingunnecessarily with the rights of presentowners. Again, it is all a matter of degree.

There was a case recently where theowner of a Western District property,which had been in his family for over a100 years, decided to sell out becauseevery little thing he wished to do to alter,modify, or improve the homestead had tobe submitted for the approval of theNational Trust. Permission wasinvariably refused. He found he could nolonger put up with this interference andput his property on the market. In effect,he had lost control over the managementof his own property.

Sometimes, too, the demands ofprogress and change must take precedenceover historical preservation. We can'tpreserve everything.


Those with a cause or worthwhileobjective to pursue should do so withmoderation and common sense and withrespect for the rights and the freedoms ofothers to choose for themselves. When

they over-step the mark — as too manyare doing — they become meddlesomebusy-bodies and a menace to personalfreedoms. Moreover, in the end, they doserious harm to their own cause.

PROFITS AND EMPLOYMENTFalling profits and rising unemployment are afflicting the Australian

economy. It is vital that the link between the two is widely understood.The I.P.A. has published an illustrated booklet which deals, in an easily

understood way, with company profits and their effect on employment.The booklet is designed for a wide distribution among employees and

students.The booklet:

• gives the facts about profits and unemployment• explains why profits are falling• describes the role of profits in our economic system• suggests what should be done to improve profit prospects and

thus employment• describes the part of profits in determining prices

The booklet is priced at 35 cents a copy, plus postage,with the followingdiscounts for larger orders from I.P.A. contributors.

10-100 copies 10% off101-500 copies 15% offover 500 copies 20% off

------------------------------------The AdministratorInstitute of Public Affairs83 William StreetMelbourne, Vic. 3000Please supply ..........copies of the booklet `Profits and Employment'

Companies will be invoiced on delivery

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iPA Review - Winter 1983 63

The Railways: Haemorrhage of theBody Politicby Professor Peter Swan and John Nestor*

"We do not ride upon the railroad, it rides upon us" (Thoreau, Walden II). Theneed to fund the huge railway deficits in N.S.W. and Victoria are one of the mainreasons why State Governments are finding it so difficult to contain state taxes. Eachrailway job is, on average, being subsidised by the taxpayer to the order of $16,000 ayear.

Students of management are well awareof what happens to organizations whenmanagers are freed of all external checksand balances, and set their own goalsirrespective of economic reality. Theproblem is compounded by shareholdersapparently so loyal and generous thatthere is virtually no limit to the annuallosses which are sustained by injectingmore cash. Managers' egos are massagedand customers beguiled by grandioseschemes costing millions which rapidlydegenerate into white elephants, while therole of management, to bring about aneconomic and efficient service, has beendisplaced by union leaders with quitecontrary objectives.

respectively of total revenue receiptsexcluding the supplement. For 1981/82this amounts to over $11,100 peremployee, which is generous to say theleast. For 1982/83 the budgeted revenue is$276m and expenditure $589m but inFebruary of this year the VictorianTreasurer conservatively estimated thatrevenue would be down by $25m, makinga taxpayer contribution towards theoperating loss of VicRail of $338m, whichis a contribution of about 135 percent ofrevenue or $16,177 per staff member.This operating deficit in 1982/83 exceedsthe entire employee cost in the previousyear.

Runaway railway deficitsTo what extent do the various There is virtually no limit to

Australian railway systems fit this the annual losses which aredescription, with the generous sustained by injecting moreshareholders consisting of taxpayers in cash.the various States and Commonwealthwho have no choice in the matter? In addition to the operating loss areCertainly the railways have displayed an capital losses arising from interest anduncanny ability to bleed the taxpayer. The depreciation. Long term borrowings atAnnual Report of VicRail in Victoria 30th June, 1982 amounted to $923m onreveals a Government contribution to which interest of only $35m was paid,make up operating losses of about $165m naturally not by the railways but by thein 1980/81 and $233m in 1981/82, which taxpayer. A slightly more realistic interestrepresent 65 percent and 88 percent rate of 8 percent would have doubled the'Peter Swan is a Visiting Professor in Economics at the Australian Graduate School of Management,University of New South Wales, and John Nestor, former railway employee, rs a Graduate student at theUniversity.The writers wish to thank Ray Bail, Jeremy Davis and Robert Marks for their comments.

6Q IPA Review -Winter 1983

capital subsidy. Only a very small andtotally inadequate allowance is made fordepreciation, so that more appropriatecurrent price allowances would greatlyincrease the loss.

The Australian National RailwaysCommission, which now incorporates thecountry, South Australian andTasmanian services, incurred operatinglosses of about $64m and $63m (excludingextraordinary items) in 1979/80 and1980/81. These sums represent 41 and 35percent of revenue respectively, or about$5,500 per employee.

Anyone reading the annual reports ofthe various railways is soon convincedthat their purpose is to confuse and hiderather than enlighten and reveal. This isparticularly the case in NSW with its StateRail Authority. Footnotes to the accountshave to be carefully appraised for varioushidden subsidies and concessions. Thetable on page 69 reveals some aspects ofthe overall deficit of the railways by alsobringing into account interest on theborrowings of the railway which weretaken over by the State Government whenthe Authority was formed in 1980. TheAuthority makes no allowance fordepreciation of fixed assets so that anyoverall estimate of the deficit would beconsiderably higher . than the estimatespresented.

The annual reports of variousrailways seem designed 'toconfuse rather than enlighten.

Moreover, there are growing contingentliabilities relating to superannuation forexisting employees. In 1981/82 the totalrevenue, excluding subsidies, was about$600m which compares with subsidies inexcess of $671m. By comparison the

overall State Budget is $5.5 billion. Thetotal annual subsidy represents $16,246per employee. This horrendous positionwill be far worse in the current year withfreight traffic hard hit by drought and thedownturn in the economy. Moreover,passenger traffic between Sydney andMelbourne is affected by plentiful coachservices and cheap airline flights viaAlbury.Why are the deficits so huge?

The most obvious cause of the high andrising deficits has little to do with pastneglect of railway services by government.Rather it is attributable to heavilyentrenched feather-bedding and workpractices which mean, in effect, that therailway unions have usurped the rote ofmanagers. The practices in the age ofdiesel and electric locomotives reflect thebygone age of steam. For example, untilrecently there were six changes of enginecrew for the fast XPT train on the one-day trip from Sydney to Dubbo and back,reflecting the staging posts of steamlocomotives. This $l0m train is currentlyrun with a staff of 6 or 7, consisting of adriver and his assistant (formerlyfireman), guard, conductor and a buffetcrew of 2 or 3. Until recently there wouldhave been an air-conditioning technicianas well. When the train was introduced,the staffing level was as high as 10. Theassistant driver and the conductor couldeasily be dispensed with, even if theexample of the latest generation of high-speed trains in France with one crewmember, the driver, is not followedimmediately.

Excess crewing is only the tip of theiceberg. Some engine drivers andtechnicians, for example, are able to earn$40,000 a year or more because ofexcessive overtime and the arrangementof shifts. Undercarriage examiners go on

IPA Review - Winter 19$3 65

strike if they are denied highly paid week-end work. Union restrictions mean thatfreight trains are limited to hauling 4,200tonnes, recently only 3,100 tonnes,whereas up to 13,000 tonnes can behauled in the United States using up to 12engines operating automatically intandem with a standard crew. Privatelyowned iron ore railways in WesternAustralia haul up to 20,000 tonnes using 32,685kW engines. In no sense can theunions be blamed for these practices.Blame must rest squarely with themanagement and politicians who allow itto continue to happen.Country passenger journeys

Feather-bedding is really only onesymptom of a general malaise in themanagement of railways in Australia.Another aspect of this malaise is adisregard of the relative economicviability of the three major types ofservices provided by railways: urbanpassenger journeys, country passengerjourneys and freight. The comparativeadvantage of railway services to road liesin the movement of very large numbers ofpeople in high density urban areas orbetween large population centres whenthe demand for travel is considerable. Italso lies in the transportation of freight,particularly heavy freight, over relativelylong distances when there is sufficientdemand to justify major investment intrack and equipment.

Urban population densities tend to betoo low to make for financially viableurban train services, while countrypassenger services are grossly uneconomicbecause of the small and scattered natureof Australia's population relative to theenormous distances involved.

The relative degrees of inefficiency areapparent from cost recovery percentages

obtained from costs and revenuesidentified in the 1981/82 Annual Report.Freight recovers 79 percent of operatingcosts from "customers'' urbanpassengers 49 percent and s countrypassengers only 32 percent. A small costrecovery is only part of the story.

Traditionally state governments haveprotected their monopolies in long-distance passenger rail services byprohibiting competition from privatelyrun intra-state bus and coach services,just as they have tried to preventcompetition in freight services byprohibiting the movement of trucks onintra-state journeys. The famous Hughesand Vale High Court case in 1954 broughtinterstate road haulage and coach servicesinto competition with trains. In Victoriacontrols on intra-state truck movementsgave rise to a whole new industry as trucksdetoured hundreds of kilometres out oftheir way into another state and backagain.

What is two and a bit hours ina fokker compared with 13 ormore hours in a train?

Private enterprise bus and coach routescan provide long-distance passengermovements more cheaply and with greaterfrequency than can under-utilized andinfrequent train services. The capital costof a single coach at (say) $180,000 is onlyabout one fiftieth that of the XPT, yet theservice provided by one or two coaches(up to about 6 if the train is full) may bevirtually equivalent in carrying capacity.

State governments have been lesssuccessful in preventing airline servicesfrom competing with trains than theyhave in excluding private bus and coachlines. Clearly, the regulators are not all-


powerful. In fact if long-distancepassenger services were priced accordingto their true costs, in many cases airlinetickets would cost an equal amount evenbefore the cost of special sleeper berthswere taken into account. If the railwayswere required to recover the full costs ofthe long and tedious passenger journeysbetween Sydney and Melbourne, East-West Airlines would have no shortage ofpassengers whatsoever for their $120return air service between these two majorcities via Albury. What is two and a bithours in a Fokker or a small jet comparedwith 13 or more hours in a train?

State Governments haveprotected their monopolies inlong distance passenger railservices by prohibitingcompetition.

The solution to the gross inefficienciesinvolved in country passenger services isnot billions of dollars spent on upgradingtrack, uneconomical electrification, oreven XPTs, which have proved so far tobe more useful for winning elections thanin carrying passengers in speed andcomfort. Rather a breath of fresh air isneeded via a policy of full-cost recoverywith no limitations on private bus, coachand airline services. Should some countrypassenger services die a natural death thentaxpayers will not join the mourners.Political lobbying

The much more fundamentalexplanation for the rail shamblesaccompanied by huge deficits lies in abasic asymmetry between the gainers andthe losers. Politicians of all politicalpersuasions, the railway managers andunions, and even the railway customers(who have few alternatives) have a great

deal to gain from a continuation of thehaemorrhage, while the victims, taxpayersin general, stand to lose a lot in aggregate.The fundamental asymmetry lies in thefact that the gains to be had — greaterelectoral appeal in country areas, a quietlife for managers who do not manage,greater promotion prospects, more jobs inthe industry and low fares and charges -are concentrated in relatively few hands,while the costs are spread thinly over alltaxpayers. Accordingly, effectivelobbyists for the railways are wellorganized while the taxpayers largelysuffer in silence. Taxpayers appearpowerless in the face of this concertedcampaign by vested interests whichbenefit the few at the expense of themajority. The difficulty at present facingpoliticians is that even the thinly spreaddeficit is now larger (of the order of $332per (income) taxpayer in NSW) and thenatives are becoming restless as the deficitmounts.

Defending the indefensibleIn their defence the railways argue that

we cannot speak of a railway deficit, justas we do not speak of the "educationdeficit" or the "police force deficit."Railways (they would say) are a publicservice just like educational and policeservices. The principle of "user pays" andfull cost recovery is not applicable (theywould say) and has never been applicable.But to mount this argument is to do nomore than state what has happened ratherthan what should happened in a well-runeconomy. There seems to be no goodreason why railways should not competeon equal terms with other transportmodes. With a possible exception of someurban passenger services there arenegligible external economies which mightjustify subsidies. The United Stateseconomy does not appear to have

IPA Review - Winer 1983 67

appreciably suffered from largelyprivately owned and unsubsidizedrailroads.

It is also argued that it would be quiteunfair to expect railways to pay their ownway when vehicles do not pay tolls for theuse of the roads. There is an element oftruth in this argument because road usersdo not pay ideal congestion and roadmaintenance charges. However, withoutdoing the railways case an injustice it canbe noted that fuel taxes, registration fees,sales taxes on motor vehicles and parts,etc. impose a burden on road users whichin aggregate exceeds outlays, whereas thebulk of track costs is provided free torailroads with capital charges paid for outof taxes. It would appear to be the usersof our extraordinarily poor interstatehighway system (is it deliberate?) who arediscriminated against, not the railways.

We need higher fares ratherthan lower fares, less trackrather than more track, fewertrains, and a tiny fraction ofthe existing number ofemployees.

There may be a stronger case forsubsidized urban railways on the groundsof excessive road congestion andpollution, but surely the most appropriatepolicy would be to internalize any suchexternalities by appropriate taxes andcharges on roads and road users as well asby the provision of ring roads andfreeways?

What can be done about it?The prognosis for the body politic is

extremely poor and it is really only aquestion of the rate at which the patientdeteriorates. David Hill's well-meaningcost cutting campaign in NSW was longoverdue. Such campaigns can removesome of the worst abuses but withoutseriously threatening the powers of thevested interests. We need higher fares andcharges rather than lower fares, fewertrains rather than more trains, less trackrather than more track and certainly onlya tiny fraction of the existing numbers ofemployees. Even if capital chargescontinue to be met by the taxpayer,operating costs should be recovered via amore realistic fare structure.Electrification is out as is the continuedintroduction of high-speed trains, whichproceed at a slow average pace on trackdesigned with grades and curves for a farmore leisurely age. There is no economicjustification for the Alice Springs toDarwin railway.

The best prospect of reform along theselines lies with greater privatization ofownership. Surprisingly, the first stepsalong this trail have been blazed by theleading freight forwarding company,Thomas Nationwide Transport, which toall intents and purposes operates its ownfreight train services via rental and leaseagreements with the railways. However,there is little hope of finding a buyer forany portion of the railways unless a freehand could be given and some prospect ofprofitability provided. This day is still along way off.

tj$ IPA Review - Winter 1983

ESTIMATED SUBSIDIES TO THEN.S.W. STATE RAIL AUTHORITY, 1980/81 to 1982/83

(excluding depreciation)Sm

Subsidies Debt ChargesYear Revenue and Total

Supplement (a) Concessions (b) Inherited (c) Current (d) Total Subsidy

1980/81 299 52 140 32 172 523

1981/82 387 68 140 76 216 671

1982/83 448(e) 77 140 70(1) 210 735

(a) Contributions from Consolidated Revenue to cover direct operating losses.(b) Includes contributions from Consolidated Revenue to cover passenger travel

concessions and freight concessions, superannuation payments, etc. A portionat least of these subsidies should really be allocated to the pensioners, farmersetc. who receive the subsidies if one were to assume that some would use trainseven in the absence of the subsidies.

(c) When the State Rail Authority was formed from the Public TransportCommission on the 1st July, 1980, $1,300m in loans provided to the railservice were taken over by the State Government. When this is added to $449min debts previously remitted it gives a total value of loans remitted of $1, 749m.This figure excludes an additional $700m in accumulated debt charges whichhave never been paid by the railways. Interest has been imputed to the remitteddebt, which does not appear in the accounts of the Rail Authority, at aconservative 8 per cent per annum. In 1982 the (nominal) interest rate on semi-government loans was as high as 17per cent per annum.

(d) Includes leaseback payments in 1981/82 as well as interest.(e) Budget estimates. Since the estimates were prepared in September, 1982 a fall

in estimated freight revenue of more than $80m has been announced. Thiswould increase the Supplement to over $528m. Action to reduce feather-bedding may have succeeded in lowering this figure.

(f) This figure consists only of leaseback payments and does not include interest.If interest costs of $54m were incurred, as they were in the previous year, thetotal debt charge would increase to $264m and the total subsidy to $789m.

Source: Annual Reports of Public Transport Commission of NSW, State RailAuthority, NSW Auditor-General and NSW Budget Estimates, 1982-83. See theAuditor-General's Report, 1980, p.20, for the information on inherited debt.


France: A Favour to the Richby Otto Von Fieandt

Government regulations have frequently unintended consequences. Using as a casestudy the recent restrictions on tourist spending imposed by the French Government,Paris-based economist, Otto Von Fieandt, shows how the regulations have hit the lessprivileged while the rich, the powerful and the well-connected continue to travel.

Well-meaning Left policies aimed athitting the rich and aiding the poor oftenproduce the opposite effect: welfareprogrammes create jobs for well-paidadministrators who absorb much of themoney intended for the poor, and so on.Recent French restrictions on touristspending abroad are another example.They are a monumental muddle, and alsoan object lesson. The rich, most of whomvoted against the Socialist government,are relatively untouched; the less well-off,who voted the Socialists in, are deprivedof a basic human right, the right to travel.Ordinary mortals

Frenchmen are now restricted tospending not more than 2,000 francs($A300) per year on travel abroad. Theuse of credit cards is prohibited.Businessmen were however allowed 1,000francs a day. Thus on Day One, a specialNomenclatura was created, one that canspend in two days what ordinary mortalsare allowed in one year. But the generaloutcry was such that, in the next few days,new privileged groups were created at therate of about one each day.

(In the Soviet Union, the Nomenclaturadescribes the privileged class that runs thecountry, and supports the regime. Theyhave immense privileges: shopping inspecial stores, foreign travel, luxuriousvillas guarded by the army. The French

Socialists are creating Nomenclaturasconsisting mostly of their enemies.)

First, businessmen rightly pointed outthat export business isn't done like that.Larger sums are required to entertainclients abroad; credit cards are needed tohire cars, etc. So on Day Two,businessmen were allowed to obtaincompany credit cards to use on businesstrips. (This is of little comfort to the smallbusinessman, who may not have acompany card. It takes weeks to get one).

So now a much-sought-after incentivebonus consists of an extra week in NewYork on your next trip: and do take yourwife along. Other special privileges wereannounced for truck drivers, studentsgoing abroad for language studies,independent professionals, and so on. Asa gesture of appeasement to travel agents,facing lay-offs and bankruptcies, thesecan now sell you an all-expense stay at theWaldorf-Astoria, and take only 1,750francs out of your allowance. So if youhave the means, you can stay a month atthe Waldorf, but you can't go out fordinner, and you must do on $A35 formovies and cigarettes. Previously, amonth in New York cost far less both tothe individual and to the balance ofpayments. .


Virtually all affluent andwell-organised people aremanaging ... the lessprivileged are seriouslyaffected.

But stupid laws can also create newNomenclaturas for people who were notparticularly privileged before. "Exchangehouse in Dordogne for loft in SanFrancisco.", said an ad. Bundles of cashare presumably left under mattresses ineach place. Bilateral deals can be made bythose who have friends abroad. Thosewho are smart rather than stupid also dobetter, as do those who get away withbreaking the law.

The businessman, the 19-year-old goingto Cambridge to play tennis, theprofessional, the man willing to rough itat the Waldorf, the owner of a countryhouse, the well-connected fellow — allthese are relatively unaffected by therestrictions, and they tend to be relativelywell off. They are all right.

Who, then, is hurt? The ordinary man,who voted for the Socialists. 2,000 francsis barely enough for a long weekend inLondon, or two weeks in Spain — if youwatch it. But it is not enough for a longmotoring trip, not to mention thehumiliation and discomfort. The French

are now looked on as the paupers ofEurope. What do you do if on your lastday you fall ill or miss your flight?

All this was supposed to improve thebalance of payments. Will it?Businessmen and sundry rich will carryon. Some small spenders will cancel theirtrips. Some foreigners won't come, asFrance is now booked chock-a-block.Private deals will keep some of the moneyinflows out of the balance of payments.So the net effect will be nil, or possiblynegative. Evasion of the controls will leadto a large Errors and Omissions item.

Thus, a Socialist government hasblundered its way into a major foreignexchange crisis. Desperately, it attemptsto level everyone's foreign spending topoverty levels. Virtually all affluent andwell-organized people are managing. Theless privileged are seriously affected. Theycan do it uncomfortably or not at all. Thesaving obtained from a majorinfringement of human rights is nil orperhaps negative.

One privileged person who is affected isthe President's wife. It was officiallyannounced that, for financial reasons,Madame Mitterrand was notaccompanying her husband on a recentstate visit abroad. Australians are lucky inbeing linked to the British rather than theFrench crown. They were able to seePrincess Diana.


Bias in the ABC?by Ken Baker

The issue of bias in the media is a recurring one. It arises because of a belief in thepower of the major media to influence opinions. It is a matter of national concern whenthe impartiality of some of the ABC's main programmes of social and political analysisis questioned.

* #The ABC has a valuable role to play in

providing a venue for open debate onissues of national concern. Of late,however, serious doubts have been raisedas to whether the ABC is fulfilling thisfunction as well as it might.

Articles published earlier this year inThe Bulletin and Quadrant by mediacritic, Anthony McAdam, put the viewthat the Department of Radio Talks andDocumentaries -- ABC Radio's principalsource of in-depth social and politicalanalysis — is a vehicle for radical left-wing views "hostile to the values andinstitutions of liberal democracy". Theconsequence, McAdam believes, has beento preclude the possibility of genuineintellectual pluralism and open debate inthe ABC.

Concern about bias in the ABC is notnew. Similar questions regarding balancein ABC programming were raised by theDix Enquiry into the ABC.

On the ABC's Talks andDocumentaries programmes, the DixReport has this to say:

"We are... unimpressed byarguments that programmes givingprominence to committed left-leaning views such as those Talksand Documentaries sometimesproduce are balanced by othersproduced in other areas, such as theRural Department, which are

sometimes alleged to have a bias theother way. We think the expositionof many of the important themesdealt with in the Lateline/Broadband/Doubletake series willbe the most arresting, informativeand effective, and attract wideraudience patronage, if more effortswere made to open the programmesto a wider range of viewpoints. Weso recommend". (10.24).In relation to The Coming Out Show

the Dix Report states, "The best interestsof the audience and particularly ofwomen, may now be served by a broader-based coverage of material...".

The ABC has a clear dutyto guard against partisanshipin broadcasting.

In contrast to much media analysis,which deals with specific instances ofbias, this article will look at the range ofideas being discussed in selected ABCprogrammes over a period of time to seewhether they appear to favour anyparticular political philosophy. Amongother things this will enable assessment tobe made of whether some of theprogrammes singled out for particularcriticism in the Dix Report — Doubletakeand Background Briefing (formerlyBroadband) and The Coming Out Show— are being opened to a wider range of


views, as the Dix Report recommended.

The role of the ABCAs an organisation which absorbs over

$250 million per annum of the taxpayers'funds it is worth outlining what thecommunity is entitled to expect from theABC's current affairs programmes.

The ABC, states the Dix Report, has aclear duty to guard against partisanship inbroadcasting, a principle which isconfirmed elsewhere by the ABC's formerChairman, Professor Dame LeonieKramer. In a response to McAdam in TheBulletin Professor Kramer writes:

"Privately they (broadcasters) canbe for or against dams, nuclearpower, religion or feministphilosophies; professionally theymust enable all sides of thesecomplex questions to be aired,without bringing to bear upon themthe weight of their own opinions.ABC staff have an obligation whichderives ultimately from the trustreposed in them and embodied inpresent and future legislation -namely to limit their own freedomof expression in order to protect thefreedom of their audiences."

The ABC is obliged to remain impartialand to express a range of viewpoints oncontentious issues.

It is reasonable to expect that in its roleas a forum for social analysis, it shouldaim at reflecting the general concerns andvalues of the Australian community. Ingeneral, for example, most Australianssupport the free enterprise system andwould thus welcome constructive debateson how this system can be made tofunction more effectively.

The ABC may also have a role instimulating public debate by introducing

new issues. It is important here that, ifbalance is to be achieved, issues anddebates should not favour the concerns ofone side of the political spectrum over theother. Finally, there is the furtherproviso, laid down by the Dix Report,that debate not promote in any formvalues which would undermine thefoundations of a just, humane society.

The nature of binsBias in the media can take a number of

forms. If the speakers selected tocomment on a contentious issue expressonly a single point of view, or if onecommentator is fed hostile questionswhile his opponent is not, or if less time isgiven to one side of the debate than theother, then clearly bias is evident.

Viewed through the mediasocial reality often appears tobe in a perpetual state ofupheaval.

There is also an institutional biascommon to most media. Viewed throughthe media social reality often appears tobe in a perpetual state of upheaval: eachday brings a new headline, a new crisis, anew sensation. Journalists tend torespond to events which have animmediate, dramatic impact, eventswhich signify disruption and change. Theurgency of deadlines and the pressure onjournalists to sensationalize reality oftenpreclude the sense of perspective andmoderation in news reporting that onlytime and reflection would bring.

Institutional pressures also exist onjournalists to capture an issue in one ortwo compelling, unambiguous images,with the result that the complexity of


social reality is often done less than justicein the media. Demands such as these areless pressing on journalists producingnews background programmes or in-depth explorations of a single issue, suchas those programmes produced by theABC's Talks and DocumentariesDepartment.

The use of value-laden terms can alsohave the effect of slanting a news reportor news analysis. Terms such as "socialjustice", "peace march" and "nationalliberation movement" are not neutral.Measures to radically redistribute wealthin society which would be called "socialjustice" by a socialist, would be read asexcessive governmental interference bylibertarians. The media are rarely thecreators of such terms and as such areoften as much the innocent victims oftheir usage as the public.

A radical redistribution ofwealth in society called"social justice" by socialistswould be read as excessivegovernmental interference bylibertarians.

These forms of bias are relativelyfamiliar and easy to recognise.

Bias of selectivityA less obvious, but in many ways a

more important form of bias arises fromselectivity in the media's coverage ofissues. This occurs when some particularmatters are highlighted, while others areplayed down or ignored. This, inparticular, is the type of bias on whichthis article will focus.

A clear recognition of the powerexercised by the media when it selects the

issues is indicated by comments made bythe Melbourne "Age", quoted in AdrianDeamer's review of Martin Walker'sPowers of the Press ("The Age", 7December 1982). "The Age" defined itsinfluence as "the power to set the agendafor public debate, to identify issues ofconcern and, by regular reporting, forcethem on the attention of the public".

In light of the recommendations of theDix Report, this article seeks to ascertainwhether there are sections of the ABCwhich 'by regular reporting' of specialconcerns, are giving undue emphasis to aparticular political philosophy.

In order to carry out this analysis a two-step approach has been taken.

First, the causes which are important tothe radical left in Australia — in otherwords the left agenda — are identified.

Second, a survey was conducted ofthree regular ABC radio programmes:Doubletake, Background Briefing andThe Coming Out Show. All areprogrammes presenting in-depth analysisof current social, political and economicissues. The Coming Out Show is definedmore narrowly as a "series on women'saffairs".The nature of agendas

The starting point for this analysis isthat all political groups have agendas -causes and issues — to which they givepriority and which, in the words of "TheAge", they attempt to force on theattention of the public.

Different philosophies tend to identifydifferent issues as "problems" needingsolution. A matter of concern to theproponents of one philosophy may be oflittle interest to the proponents ofanother. For example, the concerns that

74 IPA Review- Winter 1983

libertarians have with governmentregulation, and the inefficiencies whichthey claim result from interference withthe workings of the market place, are oflittle moment to those who place smallvalue on economic freedom.

Foreign investment is another issuewhere there are major divisions betweenpolitical philosophies. While libertariansmight argue that investment by overseascorporations brings employment andhigher living standards, the radical leftwould more likely point to the threat tonational autonomy posed by foreigninvestment.

Continual reference to theconcerns of one particularpolitical agenda can serve as apowerful strategy forchanging communityoutlooks.

Using examples such as these, it can beseen how the way in which a "problem" isdefined in the media becomes a way ofcommunicating one ideology rather thananother. There is obviously a majordifference between the media focusing onproblems which call for governmentintervention in the market (to protect theconsumer from, say, false advertising)and those which highlight the costs ofgovernment regulation (higher consumerprices).

In short, continual reference to theconcerns of one particular politicalagenda can serve as a powerful strategyfor changing community outlooks.

As one measure of assessing thephilosophy promoted by particularprogrammes, I have set out in the Table

on p. 77 agendas which are representativeof two political currents in Australiansociety. The issues listed should befamiliar to those acquainted with radicalleft-wing and libertarian literature,although which items to include onparticular agendas are inevitably mattersfor judgement.

The radical left-wing agenda -promoted particularly by those who tendto see free enterprise as exploitative -often stresses issues which purportedlyhighlight the inequity and environmentaldamage spawned by capitalist enterprise,the malevolent role of America in worldaffairs, and the debilitating restrictionsimposed on women by traditional sexroles. The libertarian agenda — whichaims to expand liberty in society —focuses on the detrimental effects toconsumers and job-seekers brought on bygovernment regulation and the damage tothe family and individual responsibilityarising from the Welfare State.

The Table, drawing on the middle-ground of Australian opinion, also setsout a sample of the issues which could besaid to be part of the agenda of theAustralian community. This agenda isbased on surveys of public opinion. Theissues of concern to the general publicinclude the burdens imposed by hightaxation, concern at the weakening of thetraditional nuclear family, and dislike ofthe influence which powerful interests -unions and business — have ongovernment.

There are a number of points about theuse of these àgendas' which need to bemade.

First, they are not meant to becomprehensive. Clearly those whoidentify with left and libertarian positions


would have many more concerns thanthose listed in the tables.

Second, the agendas are not those ofeither the ALP Government or the Liberalopposition, although clearly there is someoverlap. For example, the ALPGovernment has emphasised its supportfor free enterprise and does not supporthighly centralised economic planning.The Liberal opposition, contrary to thelibertarian position, expanded welfareprovisions when in Government andgreatly increased aid to the Third World.

Third, the mere fact that a person givesimportance to an item on one agenda doesnot ìpso facto' mean that his views reflectan underlying ideology. For example,those who wish to change the Flag mayvery well have no sympathy with the otheritems on the 'left' agenda.

The programming philosophyThe survey extended from late

February to mid-June, 1983* . Of theprogrammes monitored, about half -aproximately 30 programmes — in thisauthor's view, dealt with issues that fallwithin the left-wing agenda. One-quarter— approximately 15 programmes —concentrated on concerns identifiablewith the Australian agenda. (Forexample, BB** April 3rd, May 8th, onplans for a domestic satellite and ruralaffairs; DT March 1st, May 17th, onindustrial relations and Israel each raisedissues of general interest and dealt withthem in a balanced manner.) Twoprogrammes only fell within thelibertarian agenda. The remainingprogrammes resisted classification.

While the concerns of theradical left are being givensuch disproportionateattention, there are wholeareas of public debate that arebeing neglected.

Topics raised which favoured left-wingconcerns included the following (althoughin not all cases did the topics Iisted occupythe entire programme):— issues relatingto nuclear weapons and disarmament (9programmes); problems created by newtechnology and economic development (6programmes); radical feminist issues (7programmes); activities of Americansecurity agencies (2 programmes);aboriginal land rights; punk music associal protest; the British media's myth-making of the Falkland's war; the powerof the Jewish lobby in the making of U.S.foreign policy; a reading of fairy tales asrepressive ideology; the penal system'sdehumanising treatment of femalecriminals; gay liberation; U.S. policy incentral America, largely defendingNicaragua against Reagan's anti-communism.

The point is not that these issues areunimportant or unworthy of coverage. Itis rather that while the concerns of theradical left are being given suchdisproportionate attention, there arewhole areas of public concern that arebeing neglected. The concentration onitems in the left-wing agenda renders theseprogrammes far distant from the goals ofthe present Australian government.

"There are four programmes that due to circumstances beyond my control were 'not monitored. Theseprogrammes (BB 6th March, BB 20th March, COS 7Th May, DT 19th May) are omitted from the survey.

"Abbreviated titles of the series discussed are used here as follows:— 88 Background Briefing, DTDoubletake, COS The Coming Out Show.


A RADICAL LEFT-WINGAGENDA

Economic— virtues of centralized planning— public sector activity preferable to

private sector. `Deficits don'tmatter'.

— opposition to multinationals— minimal regulation of trade unions-- limits on business profits, profits as

exploitation--- substantial redistribution of wealth

viewed as `social justice'— priority given to conservation over

devlopment— no uranium mining, opposition to

nuclear power— no development which conflicts

with Aboriginal land claims— compulsory unionism— economic depression indicates

major flaws inherent in capitalismPolitical— support for Australia as a republic

and new Australian Flag— abolition of Senate and State

rights; centralization of power— termination of U.S. alliance— closer relations with socialist

countries— critical of U.S. activities and

C.1. A.— transfer of funds from defence to

welfare— support for unilateral Western

nuclear disarmament and peacemovement

— support for P.L.O.--. a new constitutionSocial— elimination of private schools

support for alternative families— support for radical feminism and

elimination of sex roles— anti-religion or support for

"liberation theology" (ChristianMarxism)

— tendency to see criminals and thepoor as victims of the system andsocial problems as response tounequal distribution of resources

— socialization of legal and medicalprofessions

— rejection of ethic of individualresponsibility in favour of socialdeterminism

A LIBERTARIANAGENDA

Economic— solution to depression,

unemployment, lies in freemarkets and not governmentintervention

— standard of living increased bysale of government enterprise toprivate enterprise

— extension of market toeducation and welfare

— deregulation of financialmarkets

— labour and business monopoliesseen as damaging interests ofenterprise and employees

— reduction of tariffs— balanced budget— high deficits viewed as

damaging to prosperity— opposition to union, business,

government powerPolitical— interdependence of political

liberty and economic freedom— centralized planning erodes

individual liberty and economicgrowth

— solution to Third Worlddevelopment lies in extension oftrading opportunities

— communism, a threat toindividual dignity, prosperity

— opposition to bureaucracy andwelfare state

— support for political and legalfreedoms

Social— support for private schools,

choice in education— opposition to paternalism in

social policy, support for 'self-management'

— ethic of individualresponsibility the basis of a freesociety

AN AGENDA OF THEAUSTRALIANCOMMUNITY

Economic— reduction of union power— optional union membership--- support for economic

development— prices/wages restraint-- support for private enterprise

within a mixed economy— lower taxation— need for solution to

unemployment, return ifpossible to full employment

— reduction of inflationPolitical— support for monarchy and

existing flag— opposition to increasing power

of Federal government— support for U.S. alliance

concern with threat fromcommunist powers

— opposition to terroristorganisations

— support for moderate reform ofgovernmental/political system

— concern with quality of politicalrepresentation

— business, union influence ongovernment seen as excessive;ordinary people neglected

— opposition to anti-nucleardemonstrations

— increased defence spendingSocial— concern about weakening of

family— maintenance of welfare system— increased benefits for

pensioners— government subsidies to private

schools based on needs— concern at weakening of law

and order; support for harsherprison sentences

— improved educationalstandards

IPA Review • Winter 1983 77

Moreover, the libertarian position,despite the fact that it represents anincreasingly vigorous current withinAustralian intellectual life, appears tohave been almost totally ignored. Againstthe thirty or so programmes in the surveyperiod that raised issues of particularrelevance to the Left, only twoprogrammes — concerning thederegulation of airlines (DT, 19th April)and the domestic policies of the ReaganAdministration (BB 22nd May) — were ofparticular interest to libertarians.

The selective focus of the programmessurveyed will become more obvious if weconsider alternative ways in which someof the issues raised could have beenapproached.

On the issue of nuclear arms, it isimportant first to recognise that peace initself is a value shared by all themainstream political camps. There ishowever, a left-wing position on the beststrategy for obtaining peace. In the viewgenerally held by the radical Left, thearms build-up in the West, particularly bythe Reagan Administration, stands as themajor threat to world peace. Thus the keyto peace, according to this position, lies inpreventing the Western arms build-upand, in its more extreme version, placingpressure on Western governments tounilaterally disarm. The alternativestrategy, and this is a position held by themajor Western governments, is that peacedepends on the West maintaining acredible nuclear deterrent to Sovietexpansion. It follows that by pressuringWestern governments to disarm, thepeace movement is destabilising thebalance of power and so increasing theprobability of international war.

In none of the programmes on nucleararms was the second line of argument

adequately articulated. Instead we heardabout the views and activities of the"peace" movement (DT 5th April, DT2nd June, DT 14th June, BB 17th April);the threat posed by U.S. military intereststo the self-determination of an indigenouspeople (BB 5th June); and the radiationpoisoning engendered by the U.S. nucleararms industry and U.S. atomic testing(DT 3rd March, DT 2nd June, DT 7thJune, BB 27th February). While theseprogrammes successfully conveyed thehorrors of nuclear war (DT 3rd May, DT2nd June), they ignored the role ofnuclear arms in maintaining theinternational balance of power.

The approach taken to the issue ofeconomic development also tended tohave a selective focus. While it islegitimate to take into account the impactof economic development on theenvironment and traditional cultures,(e.g. DT 7th June) and even theoppression of women by new technology(COS 11th June), there are also majorproblems associated with economicunder-development, namely poverty,slums, inadequate welfare, health andeducation services, and a lack ofemployment opportunities. These issuestended to be neglected.

The Coming Out Show has aremarkably narrowconception of women'sissues.

Unemployment is clearly a majorconcern in the community. One approachto this issue, shared by many economists,is to focus on the need for wage restraint,and the job destruction caused byminimum wages, penalty rates andrestrictive practices by trade unions.

78 IPA Review- Winter 1983

While not all programmes ignored theseconcerns, unemployment tended to beraised in the context of job destructioncaused by new technology (DT 29thMarch), the need for government fundingfor job creation schemes (DT 24th May)and the "job blackmail" used bycorporations against conservationists,(DT 12th April). The programme onyouth unemployment (BB 29th May) tooka dismissive approach to the relationshipthat might exist between minimum wagesand the high incidence of jobless youth.

Stories on security agencies were clearlyof interest to programme producersduring the survey period. However, whileDoubletake raised questions around theactivities of America's National SecurityAgency, on the question of the RussianKGB the programmes were silent. Yet thiswas the period in which reports of KGBinvolvement in the attempt to assasinatethe Pope were appearing, in which Franceexpelled forty-seven Russian diplomatsfor spying, in which speculation of KGBinvolvement in the peace movement wasgrowing, and of course it was the periodin which the Australian Governmentexpelled Valerij Ivanov. Clearly here wasan issue of great national concern.

Although advertised as a series onwomen's affairs, The Coming Out Showhas a remarkably narrow conception ofwomen's issues. For example, the concernshared by many women about theweakening of the traditional familysimply does not feature on The ComingOut Show's agenda. Indicative of theseries' narrow philosophical focus was theabsence of any substantial attempt topresent views critical of radical feminism.For example, in April the noted Americancritic of radical feminism and campaigneragainst the controversial Equal RightsAmendment, Phylis Schafly, visited

Australia. Considering the pending SexDiscrimination Bill in this country onemight reasonably have expected her viewsto be of interest to a programme cateringfor women. Such was not the casehowever. Nor did The Coming Out Showin its programme on . the Anzac DayWoman Against Rape march, (COS 30thApril) make any attempt to present bothsides of what was clearly a controversialissue. The Coming Out Show celebratedInternational Women's Day with asympathetic portrait of the RussianBolshevik, Alexandra Kollontai (COS 5thMarch).

To the extent that the results of a surveyover this period can be taken asrepresentative, the conclusion, in thisauthor's view, must be that the ABC isnot fulfilling its role as a forum for debateon issues of national concern as well as itmight. If the ABC has acted on the statedrecommendation of the Dix Report forparticular programmes to incorporate awider range of views, its actions have notbeen sufficiently effective. There are anumber of points for consideration raisedby this.

The new Board has aresponsibility to ensure thatthe ABC not promote theinterests of a small section ofthe Australian community.

First, the ABC should function so as toreflect the principal values. of theAustralian community. It certainly doesnot have a charter to consciouslyendeavour to shift the values ofAustralians. If sections of the ABC areattempting to do so, this can only serve toweaken, not enhance, national unity.


Second, the avoidance of anysuggestion of political bias is a constantconcern for the ABC. Yet as long as theABC continues to give undue attention tothe concerns of the radical Left, itremains open to the charge that it ispromoting a particular political line. Ifthe ABC wishes to remain a spectatorrather than a participant in the partypolitical arena, it must be seen to beimpartial on political questions.

There is also the consideration raised bythe Dix Report that programmes whichfail to reflect a genuine range of issuesand viewpoints unnecessarily limit the sizeof their audience. Unlike the commercial

stations, ratings may not be a principalconcern of the ABC; nevertheless, it ishardly in its interest to limit its listeningand viewing audiences by a too narrowselection of topics.

Finally, the presence of bias in even therelatively small section of the ABC's vastoutput with which this article deals, canserve only to undermine public confidencein the ABC. The new Board of theAustralian Broadcasting Corporation hasa responsibility to ensure thatprogrammes are not used to promote theinterests of a relatively small section ofthe Australian community.

SYMPOSIUM ON THE FREE SOCIETYto be held on Sat. 5th and Sun. 6th November at

Macquarie University, 9 a.m. to 5.30 p.m.

The seminar will be held by the Adam Smith Club and Australians for CommonSense, Freedom and Responsibility.

The organisers of the Symposium believe:

— that the free society is under threat

— that the future of our free society depends on halting and reversing thethreat to private property, freedom of contract, freedom of trade andenterprise, freedom of movement of capital and labour.

Contact: Professor L. J. M. CoorayMacquarie UniversityNorth Ryde N.S.W. 2113. TELEPHONE: (02) 888 8000


Youth: Priced Out of Jobsby Jacob Abrahami

Youth unemployment is a social and economic tragedy. Yet those most concernedabout the consequences of this evil often support policies which will exacerbate theproblem.

Two broad approaches are beingsuggested to deal with youthunemployment (The "kibbutz"suggestion can be disregarded).

The first proposes increasedgovernment spending in order tostimulate the private sector and expandso-called job-creation programmes.

This route inevitably means highertaxes, more public sector borrowings andgreater budget deficits (often all three).

Some industries may benefit fromincreased government expenditure but,experience has demonstrated that thisapproach does not work for the economyas a whole, as higher costs, higherinflation and higher interest rates forceother businesses to shed labour.

Indeed, the rise in unemploymentduring the past decade has beenaccompanied by an unprecedented growthof government demand. Job-creationprogrammes at best, only offer temporaryband-aid solutions. What are needed arereal long-term jobs.

Labour market rigiditiesThe second approach concentrates on

labour market rigidities — award wagerates and restrictive practices by unions.

High wage costs — (includingminimum wages, penalty rates, payrolltaxes) force people out of jobs,particularly the young who form a highproportion of the unemployed.

Because of the need to learn on the job,productivity in the early stages ofemployment tends to be low. Yet awardsrequire the payment of very substantialwages which in no way relate to theproductivity levels of the young andinexperienced.

The table below shows minimum awardrates of pay for a select group ofoccupations in Victoria. (There can bevariations between the States. In the fastfood' area, for example, minimum wagesin Victoria are significantly higher than inNew South Wales). Over the industriessurveyed in the table, school-leavers andthose with very limited work experiencereceive on average more than 60 percentof the pay prescribed for experiencedadults. In some cases the award for aschool-leaver is identical to that of anadult with a number of years experience inthe job.

It is little wonder therefore that theunemployment rate (26 percent) of theunder 19-year olds is 5 times that of themost experienced section of the labourforce, the over 45s (5 percent).

SwitzerlandThis stands. in striking contrast to

Switzerland where unemployment is lessthan 1 percent. According to the Britishweekly, The Economist, wages for school-leavers and apprentices in Switzerlandaverage only 17 percent of the adult wagefor the same job.


Clearly, what is urgently needed is achange in 'minimum wages' for juniors.Awards intended to protect the weak havethe opposite effect. Swiss minimum levelsmay be too low. But it is clear that theyoung unemployed should be free to offertheir services for a wage that more closelyreflects their productivity, rather than beforced to accept the empty promise ofhigh wages for jobs that will never cometheir way.

Penalty rates also hit youthemployment prospects. Many youngpeople wish to work weekends and nights,and penalty rates (as some governmentministers have recognised) can cut downjob opportunities.

To compound the damage, somegovernment imposts directly affectemployment in the private sector. Forexample, Woolworths has noted that itwould have been able to employ anadditional 2,000 staff (presumably manyof them young people) had the money itwas required to pay in payroll tax beeninvested in new shops.

Despite the downturn in the economythe Victorian Government in its last

Budget raised payroll taxes: the irony ofthe situation is that payroll tax collectedby governments is used in part to financeartificial job-creation schemes.

Union restrictive practices such as'proportions' clauses which require asupervisor (whether needed or not) for acertain number of employees can alsodiscriminate against youth employment.Similarly unduly tight job classificationsin some awards make it difficult to giveyoung people on the job experience to testtheir particular skills.

An attack on labour market rigiditiesfaces one major obstacle compared withthe big government' solution. It meansbreaking with traditional work practicesand wage-fixing arrangements which aresupported by powerful interests.

Trade unions and some governmentsprefer the big spending approach becauseit seems to offer an easier way out. But itis less obvious why welfare organisations,which are most concerned to assist theyoung unemployed, do not use theirmoral authority to push for a solutionwhich tackles the major problem oflabour market rigidities.

Minimum Award Rates of Pay($)

Age BuildersLabourer

ShopAssistant

Storeman &Packer

RestaurantHand

CommercialClerk

Under 16 266.38 112.50 94.15 144.90 108.8016-17 266.38 123.75 117.70 144.90 120.9017-18 266.38 151.90 129.45 144.90 145.1018-19 266.38 180.00 164.80 176.00 169.2519-20 266.38 202.50 238.80 207.00 193.4520-21 266.38 225.00 238.80 207.00 217.60Adult 266.38 225.00 238.80 207.00 241.50

"Females only. The award for males under 17 years old is 520.70 less a week. Males over 17 years old receivethe same as females.


Evaluating Australia'sConstitution *By Professor Rufus Davis

The Australian people are being invited to consider major changes to theConstitution. But, by most criteria, the Constitution has performed very effectively.Following his article in the Autumn "Review" on the debate surrounding theConstitution, Professor Davis of Monash University looks at how we can evaluate itsperformance.

on evaluating the working of theconstitution?

The relationship between aconstitutional system and the politicalsystem is ineffable and hard to capture ina single analogy. But what must be madevery clear is that however we distinguish aconstitution from the political system, it isvital to remember that the constitution isan object, not a subject! What this meansis that rules do not work by themselves.When we pass judgment on the quality ofa constitutional system, we are passingjudgment NOT on an object called aConstitution, but on a constellation ofliving men, in living roles, in livinginstitutions who work to the rules, andupon the rules — Prime Ministers,Premiers, the men in the judiciary, themen in the parties, and the men whoadvise and serve them — the men whobend, manipulate, extend, narrow, useand misuse, interpret or misinterpret therules. The federal scheme to monopolizeincome tax in Australia in 1942, forexample, was not implanted in theconstitution in 1901 to be discoveredsimply by the reading of it. It wasdesigned from various constitutionalpieces by a particular party of men ingovernment and legitimated by aparticular group of men in the judiciary.

"Excerpts from the opening paper given at the Third Federalism Project Conference in Canberra, 10thFebruary, 1983.

How should we go about making ajudgment about the performance of theAustralian federal system? How shouldwe rank it among the constitutionalsystems of the world?

When we are called to pass judgmenton the working of the constitutionalsystem, I take it that we are required toevaluate each and every part of the system— that is, the machinery and theprinciples embodied in the one hundredand twenty eight clauses of theconstitution.

If we believe however, that there ismore to a constitution than meets the eyethen a problem arises. There are, forexample, as we well know, a number ofpolitical institutions (e.g. caucus) andpolitical practices (e.g. the differentmodes of selecting a ministry or thedifferent roles of Prime Ministers indifferent parties, etc.) that obviouslyaffect and must, by their very nature,continue to affect, the way a constitutionworks. And it is equally obvious thatthere are political practices that theconstitution, however dynamic andrelevant, cannot and will not ever be ableto reach, whatever we may do toincorporate or codify them from time totime. The question is how far should weenter the domain of politics if we are set


Rules and Players

Obviously a living constitution is not,nor can it ever be, perfectly coincidentwith the political system. The only lifeand meaning it can have at any givenmoment is the life and meaning it candraw from the actors who work it. Itcannot live by itself, nor can it draw lifefrom itself. We cannot therefore, in any

".... give the men of Georgiaa perfect constitution andthey will botch it up"

but a metaphoric sense, praise theconstitution for its flexibility, or condemnit for its inflexibility, praise it for itsingenuity or curse it for its irrationalityand unworkability when our schemes arethrown down. We can only talk of thewisdom or the pigheadedness oflegislators who choose to work theconstitution in a particular way at aparticular time, or who cannot, or don'twish to find other ways to achieve theirends but the one way they have chosen. Itmay be true, perhaps, that there are timeswhen the workmen may justly blame theirtools. For there are limits to humaningenuity and imagination, and rules canand do make some games more difficultto play than others. But the ease ordifficulty of the play depends on a vastnumber of things which do not alwaysmake it easy to judge whether the fault, orwhat degree of fault lies with the playersor the rules. The important thing toremember is that one should neveranthropomorphise the rules so as toexonerate the players. Nor should oneforget the point of the apocryphyl remark— "Give the men of Massachusetts apoor constitutional instrument and theywill work it well, but give the men of

Georgia a perfect constitutionalinstrument, and they will botch it up!"

First test: health, welfare, liberty andstability.

What kind of objective criteria do wehave that will tell us whether theperformance of a constitutional system isgood or bad, whether the system isworking well or badly?

Let us consider the hypotheticalsituation where on every internationalindicator of health, welfare, liberty andstability, etc. Australia is ranked firstamong the nations of the world. What isone entitled to infer about thecontributory role of its constitutionalsystem — that it has everything,something or nothing to do with theresult? The question is not withoutrelevance since our hypothetical is, infact, very close to the truth of the matter.Thus, for instance if we take note of thethree point scale used by the InternationalEnvironment Fund to determine thephysical quality of life in the countries ofthe world — mortality, life expectancy atthe age of one and literacy — Australia isranked tenth on the list of countries it isconsidered most desirable to live in.

Almost on every socialindicator used by the U.N.Australia consistently rankshigh among developedsocieties.

Again, on almost every indicator usedby the United Nations to monitor thesocial condition of each member country— for example, the average rate ofgrowth of real GDP, or generalgovernment civil expenditure on health,


education, and welfare services, provisionof housing, public order and safety,assistance to the arts, provision of publicradio and TV services, etc., Australiaconsistently ranks high-middling to highamong the developed societies of theworld.

Or, again, if we use the scale ofInternational Industrial Competitivenessto measure the competitive strength ofeach of the OECD countries, Australia isranked 7th out of 22 key nations! Thefactors used in this scale (based on WorldBank, IMP, OECD and UN data) werethe dynamism of the economy, thedynamics of the market, humanresources, education levels, the structureof the labor force, the role of the state,outward orientation, socio-politicalconsensus and stability.

Or again, if we take account of theFreedom House seven-point ranking ofthe condition of political rights and civilliberties in the world — for example, thefree election of governments, universalsuffrage, freedom of speech, association,religion, rule of law, etc. -- things werarely pause to note — Australia is amongthe first twenty of — what are termed -the most free societies in the world!

Second test: inner strengthMeasured by these indicators,

Australians need hardly be dismayed.These are tests, however, that measure thevisible achievements of a society; andthese are achievements that may or maynot be due to the way the constitutionworks. While it may be presumed that aConstitution establishes a civilizingclimate for social achievement,nevertheless it is not always easy toestablish a specific linkage between thetwo. There is a second test, however, thatis implicit in all tests of a constitution. Let

me call it — for want of a better term —the test of the "inner strength" of asociety. I mean by this — simply thedegree of endurance, hardiness, stability,coherence, adaptivity, vigor,resourcefulness and outlook on the world.It is all those attributes of a society thatmake for its survival, and its capacity tokeep pace with the development of theworld. It is something akin to saying of aperson that he or she has great innerstrength or that a person copes well withhis or her life experiences or that they area people made for all seasons! And ofcourse when we say this about them we donot ordinarily mean to convey the ideathat such a person is necessarily Croesus,Onassis, or Pierpont Morgan! But theextent that a constitutional system maycontribute to the "stability" of a societyis to say something good about theconstitution. Conversely to suggest that asociety can have "inner strength" whileits constitution encourages permanentrevolution is, in my view, a contradictionin terms.

The constitution hasresponded to severe challengeand crisis.

Now as one measure of the "innerstrength" of society, the idea of stability,like the elements of coherence,endurance, adaptivity, vigor, etc., is amacro concept consisting of many sub-elements, each of which, if it can be used,is capable of revealing a small segment ofthe contributory value of a constitutionalsystem. What are these sub-elements ofstability? They are revealed in suchfamiliar questions as these: To whatextent, for example, does the constitutionmake it easy or difficult to build


consensus in the society; or to what extentdoes it make it possible to defuse, orcontrol the disintegrative forces that areendemic in all societies; conversely, towhat extent does the constitution generateor aggravate dissension, tension, anomie,and stress in society (e.g. Who and whatare we to blame for the constitutionaldrama of 1975 — the constitution, theGovernor-General, or the players whochose to play the drama the way theydid?); what mechanisms does theconstitution provide for the resolution ofconflict in society (e.g. Conciliation andArbitration Commission, Family Courts,etc.), and how well do they work; to whatextent, and with what ease does theconstitution adapt to changingcircumstances and changing needs; and soon and on.

If we took all these elements — macroand micro — and devised a scale capableof measuring both the "inner strength"of a society, and the contribution that aconstitutional system makes to suchstrength (positively or negatively), howwell would the Australian constitutionrank by international comparison? Such ascale were it possible, would doubtless behighly persuasive. But, aside from allother problems, it will be apparent thatthe elements which go into the making of"inner strength" though they may bereduced in generality in the way I haveillustrated, still remain at too high a levelto be used. To trace the ways in which aconstitutional system affects such broadelements as stability, consensus,coherence, resourcefulness, etc., we needto refine them a great deal more; we needa great deal more information, andperhaps a more exalted faith in geometricprinciples.

At present however, we'have nothinglike the data to entitle us to speak in any

other than impressionistic terms. Not thatthe smell of our noses, the sound of ourears, or the sight of our eyes arenecessarily unreliable. For certainpurposes they may be the best source ofinformation we have. Indeed, if we areinclined to cast off the methods ofpositive political theory (i.e. systematicempirical testing, and quantification),and if we are not afraid of being named"phenomenologists", then we might wishto assert — as I do — that obviously theconstitution has survived, obviously it hasadapted to the times, obviously it hasresponded to severe challenge and crisis,obviously it has sanctioned and presidedover the development and integration of anation, obviously it has both generatedand constrained conflict, and obviously ithas both frustrated government and madegovernment possible. But as obvious asthis may be to me and others, it is equallyobvious that it is not obvious to all!

Third test: the federal performanceI have suggested thus far, that there are

two ways by which we can evaluate theworth of a constitutional system: first, bythe test of socio-economic results —visible and measurable — that may bereasonably linked to the working of aconstitution; the second, by the indicatorsof "inner strength" — e.g. stability,cohesion, resourcefulness and adaptivitythat must apply to all constitutionalsystems irrespective of their design andpractice. There is however, a third andadditional way that specifically applies toall those cases where a constitution hasbeen designed to serve both the generalpurpose of all constitutions and a specialpurpose — for example, the specialpurpose of a theocratic system as in Iranor a federal constitutional system as inAustralia. In all these cases we arerequired to consider how a constitutional


system serves not merely the generalpurpose of all constitutions, but also thespecial purpose of a single system. And inour case it brings me directly to thequestion — by what criteria (in additionto those I have discussed) shall weevaluate the performance of our ownconstitutional system? Have the specialpurposes of the federal design beensatisfied or not.

Stability, survival, adaptivityand compromise are fourreasons why Australia is anexample of a successfulfederation.

There are of course many criteria, andmany ways of applying them. I want toillustrate one of these ways by glancingquickly at Ursula Hicks' book,Federalism: Failure and Success — aComparative Study, published in 1978.

Ursula Hicks* begins her study bydefining "the essential institutions of afederation", and then explains what shemeans by failure and success. Theproperties she ascribes to a federal systemare quite conventional, and need notdetain us. Her criteria of Failure andSuccess however, are more interesting.Thus she writes:

"If we adhere strictly to the positionthat the objective of federation is toestablish and maintain a politywhere government by the peopleproduces at one and the same time astrong self-conscious nationalorganization and also keeps intactthe rights and cultures of the unitsas enshrined in the Constitution,then any deviation from such apolity must be accounted a failure.

'Professor in Economics. Oxford Universil v.

The basis of this philosophy isunassailable, but there are manyacceptable degrees of change andadjustment which can be toleratedwithout destroying the federalframework. In a rapidly changingworld the relation between thecentre and the units can never bestatic. A federation may developinto a substantially differentorganization from that which thefounders envisaged, but still remainmost definitely a federation. As weshall see this is often largely a matterof increased centralization. Goodexamples of this are the growth inpower of the Swiss 'Conseil d'Etat'or the emergence of direct grantsfrom federal funds 'to localauthorities in Australia and India."

Once the criteria are defined, her nextstep is to survey a number of specific casesof failed or successful federal systems,and the title she gives to each chapterthrows further light on what success orfailure mean to her. Thus, in their order:Attempted Federations which NeverMaterialized (e.g. South Africa);Abortive Federation in East Africa (e.g.Kenya, Uganda and Tanganyika); ShortLived Federations which never achievedNationhood (e.g. Caribbean, and theFederation of Malaya and Singapore); ASad Case of Total Failure (e.g. theCentral African Federation); The LongRoad to Indian Federal Union; ThePakistan Experience; Decolonization andFederalism in Nigeria; and finally, TwoSuccessful Federal systems — Australiaand Switzerland!

"Australia" — she writes — "mustbe counted as one of the world'smost successful federations -- alongwith USA, Canada andSwitzerland."


What qualifies Australia for thisaccolade? Ursula Hicks comes to thisconclusion by three simple steps: first, shenotes the various changes that have takenplace in the financial relations of thefederal and state governments since 1901(i.e. 1910, 1927, 1942, the great splurgewith Sec. 96 in the years 1972-75); second,she observes that while these changes havealtered the character of the system inmany ways, the system still retains itsfederal qualities; and thirdly, she pointsout that whenever the federal and stategovernments came to a "nasty" or"awkward" corner in their relations, thecrisis was resolved by "negotiation and awillingness to compromise, so that noviolent measures were required". In otherwords, stability, survival, adaptivity andcompromise are the four reasons whyUrsula Hicks would nominate Australiaas an example of a successful federation.

Constitutional achievements

I agree with the essence of UrsulaHicks' judgment. But I would like to putit another way. By the common standardsof democratic societies, our constitutionhas succeeded in any number of ways. Ithas succeeded in authorizing and holdinga nation together. It has succeeded inbuilding and developing a will for law andorder. It has succeeded in providing andproving the possibility for growth anddevelopment when there is initiative andconsensus. It has succeeded in makingand extending the virtues of choice bydiffusing the centres of authority. Andmore than this, it has succeeded inholding out the wisdom of change byevolution.

This is of profound importance. Forwhile all constitutions must, like allhuman institutions, undergo change, thequestion is how-often, rarely, slow, fast,

minimally, extensively; by what means,by frontal shock assaults, by patching, byreplacement, by radical surgery, by minorsurgery? And the question is not merelyhow, or what, or when, but also, on thebasis of what evidence of what defects ischange to be made, and on the basis ofwhat evidence can betterment bereasonably expected from the changesthat are proposed? The answer is rarelysimple or obvious. To say, for example,that a constitution should be changed asoften as necessary, or as often as thepeople want it, is not to answer ourquestion, and worse, to misconceive thenature of a constitution.

...dramatizing our passingprejudices every few years torationalize the need forwholesale constitutionalrevision.

There are, of course, many ways ofperceiving what a constitution is — forexample it may be conceptualized as rulesgoverning the organization and conductof government, or as a loose fitting skinthat continually moulds and remouldsitself around the form, the play, and themoods of the body politic, or as a frameof reference, or as a pattern of politicalbehaviour, or as a system of direction, oras a code of conduct. No analogy willindicate its nature. But one thing aconstitution always is and must be, andthat is — a system of limitations.

To accept this, is to accept thefundamental principle ofconstitutionalism — that is thesubmission of government to an agreedsystem of restraints. This is a fragiletradition that is so vital to preserve for


Australia. But we cannot foster thistradition by a belief that a constitutioncan be treated like a suit, or a piece offurniture, or a machine that can be madeover or discarded whenever a contentiousmood, fashion or vision of public welfareoccupies and obsesses the changingoccupant of a throne.

We must learn, as we have done overthe past eighty years, to live, work, andfind solutions to our problems within theIimits of the constitution as they appear tous at any given moment. It calls forpatience, wisdom and understanding thatgenuine constitutional life is a life ofimprovisation and exploration — acontinual coping with restraint.

This is not to say that all limitations aresacrosanct or that all restraints onpolitical power are of equal value. Indeed,all limitations undergo change of one kind

or another and often whether we areaware of it or not. Some may simplyatrophy when there is a manifestincoherence between what is desired andpractised and what is formally denied.But like living matter, so a livingconstitution must not be forced to anunnatural speed or degree of change.

If we cannot inculcate thisunderstanding of our constitution, if wecannot foster the idea thatconstitutionalism and gradualism go handin hand, we cannot build a confident basisfor our future. Worse, we court caesarismif we believe that we can dramatize ourpassing prejudices every few years torationalize the need for wholesaleconstitutional revision. The resources ofour constitution are almost infinite if menwill only read their history withimagination rather than passion.


Shopping Hours: Regulation for theMany or the Few?by Geoff Hogbin *

Visitors to Australia from abroad are astonished to discover that shopping for a widerange of consumer goods is generally prohibited during week-ends, and that shops areclosed on Saturday afternoons. Typically they regard the restrictions as quaintaberrations of an Antipodean society: to be viewed with the same amused incredulity asother oddities of our Continent such as the kangaroo, koala and platypus.

To be sure we have had even moreoutlandish impositions on consumers inthe past. Had a visitor come to Australiathirty years ago, he or she would havediscovered that bars closed at 6 p.m.Lurid descriptions from the locals of "the6 o'clock swill" can make them gratefulfor the small mercies of 10 p.m. closing ofhotels and a late shopping evening. Ifgovernments are capable of foistingDraconian measures like 6 p.m. closing ofhotels on the population for more thanhalf a century, perhaps it is not quite sodifficult for the visitor to comprehend ourstoic acceptance of congestion and chaosin shopping areas on Saturday mornings,and the absurdity of threat of gaol foranyone with the termerity to sell paint-brushes and paint on Saturdayafternoons.

Of course, it is conceivable that the restof the world is depriving itself of the"benefits" which the prohibitions onweek-end trading bestow on us. Butvisitors find this notion difficult toaccept.Public interest explanation

If pressed for a rationale for therestrictions on week-end trading, one canchoose between two broad arguments.The first, which may be termed the publicinterest explanation, is that the laws

protect the community from harmfuleffects of unfettered trading, therebymaking Australia a better place in whichto live. More specifically, the argumentseems to be that Saturday afternoons andSundays are times during which peopleshould be free to pursue leisure activitieswith their families. This is conducive offamily unity and the health of societygenerally. If shops are permitted to openon week-ends, those who staff them andtheir families will suffer accordingly.

Why is family unitythreatened by engaging in thesale of nails at week-ends, butnot garden fertilizers.

If the visitor is unable to discern thatthe Australian family is in a healthiercondition than the family of his or herown country, one can always point outthat it is difficult to compare such thingsacross societies. But it is more difficult toexplain the apparent contradiction thatgovernments seem to perceive little needto protect the families of roughly1,000,000 people (one-sixth of theworkforce) who cater for what have cometo be regarded as week-end "essentials"— meat pies at the footy, restaurant

*Assistant Director, Centre of Policy Studies. Monash University


meals, services of hotels anddiscotheques, pornography, movies,petrol, fast foods, airline travel, fishingtackle, week-end newspapers, and muchelse beside. Why is family unitythreatened by engaging in the sale of nailsand timber at week-ends but not ofgarden fertilisers?

If the public interest explanation iscorrect, the answer must be that whileconsumers may be inconvenienced by theweek-end prohibitions on sales offurniture, clothing, giftware, hardwareetc. this is far outweighed by the benefitsto the people who sell such items.

However, working housewives mayhave doubts about the validity of thisexplanation when they reflect that theyprobably have twice the spending powerof their house-bound mothers and onlytwenty percent of the time to dispose of it.In much the same way, it is difficult forvisitors to take seriously the notion thattheir countries are worse places in whichto live because people are free to shopduring week-ends.The vested interestexplanation

The second line of argument advancedfor prohibitions on week-end shopping isthat they are maintained, not because onbalance they make Australia a better placein which to live, but because certaingroups find them beneficial. Theproponents of this view doubt thatomniscient and benevolent governmentsare the guardians of the public interest.Instead, they believe that various interestgroups are able to gain advantages forthemselves at the expense of the rest of thecommunity by exploiting -the desire ofpoliticians to hold political office. This isnot to say that politicians are lessconcerned than others for the publicinterest.

Rather, the public interest is only oneobjective which politicians take intoaccount in formulating policies. Otherimportant factors which influence theirdecisions include the desire for re-electionand for accession to power. Because ofunavoidable peculiarities of politicalvoting mechanisms, pursuit of these latterobjectives leads politicians to cater for theinterests of lobby groups which havedisproportionate power to provide eitherelectoral or financial support.

There is now a growingawareness that anyshortcomings of the marketmay fade into insignificanceby comparison with those ofpolitical processes.

Consequently attempts to understandthe reason for the existence of a particularpolicy, by reference to what politiciansperceive to be the public interest, arelikely to be unsatisfactory. More adequateexplanations for the form of any givenpolicy will require a systematicunderstanding of the complex inter-relationship between the interests ofpoliticians, lobby groups, and individualvoters. This view of the way in whichpolitical systems function suggests that weshould not expect them to generateoutcomes favourable to the publicinterest. On the contrary, the publicshould be constantly alert to thelikelihood that any political process willbe used by the few to exploit the many.

In short, just as markets do not alwaysfunction in a way which provides thepublic with what it wants, so politicalinstitutions have their own set of inherentimperfections, some of which impose


serious costs on the community. This lineof argument may be termed the vestedinterest explanation for governmentregulations.

Even when it becomes clear thatregulations are socially undesirable, thefunctioning of the political system makesit extremely difficult to remove them.Abolishing benefits conferred on peoplein the past carries with it the threat of lossof political office. The implication is thatmaintenance of inappropriate regulationsis more likely to be both financially andpsychologically beneficial, than costly,for legislators. Whereas businessmensuffer financially if they neglect to remedypast mistakes, legislators are likely tobenefit from failure to take correctiveaction.

Few people relish making decisionswhich will put industrious andconscientious people out of their jobs ortheir businesses. But correction ofregulatory failures almost inevitablyentails doing just that. The discipline ofthe market forces businessmen to makethese unpalatable decisions. But there isno comparable pressure on legislators,partly because the costs of their mistakesare frequently not readily indentifiable.

Moreover, since the costs are oftenwidely dispersed across the communityand quite small for individuals, signals ofdissatisfaction to politicians from thosewho suffer from regulations are oftenweak. This means that although, inaggregate, the costs of an inappropriateregulatory measure may be high, theirimpact on the political process may besmall. Again, this contrasts with themarket process where the community canquickly and effectively informbusinessmen of their failures by reducingthe flow of dollars to them.

After decades of propaganda decryingthe failures and iniquities of the marketfrom possibly well-meaning sources in thepolitical sphere, academia, the media, theschool system, and, more recently, thechurches, there is now a growingawareness that these shortcomings mayfade into insignificance by .comparisonwith those of political processes. It shouldbe understood that people who questionthe efficacy of regulatory activity considerthe defects to be inherent in the politicalprocess, rather than a consequence of theinadequacies of past and presentlegislators. However, we are now reachinga stage where future generations may feeljustified in holding our present legislatorsinexcusably responsible if they do nottake more explicit account of the costs ofregulation.

Why should we not beoutraged to have ourshopping time censored?

There may be some virtue in judgingthe performance of governments by someof the same criteria as are frequently usedto evaluate the performance of freemarkets. For example, by asking howmuch control the community has overwhat governments `produce' and sell to usin return for, on average, more than athird of our incomes; by querying whetherthe products of government are shoddyand defective and what people can doabout it if they are; and by asking whetherthose who advocate more intervention inmarkets and `bigger government' mightnot be engaged in dangerously misleadingadvertising.

Remove all restrictionsIn spite of the fact that some retailers

and employees will find the process of


adjusting to longer trading hoursdifficult, there are compelling reasons forimmediate and complete removal of allrestrictions throughout Australia.

First, because of the increasingnumbers of women with families in theworkforce, the benefits to consumers nowalmost certainly outweigh the adjustmentcosts by a wide margin, even if they didnot in the past.

Second, despite the current recession,there is little doubt that the proportion ofwomen in the workforce will continue torise in the longer term. Thus, there will bea growing demand for additionalshopping time at week-ends. Eventuallygovernments will find it in their intereststo respond to the political pressures thiswill create. The postponement ofderegulation is unlikely to reduce theseverity of the adjustment costs, so thereis nothing to be gained from delay. On theother had, there is a good deal to lose.Consumers will suffer continuinginconveniences for as long as restrictionson week-end trade exist. Married womenin a full-time job, and those women whofeel they can take only a part-time job incurrent circumstances, are likely to be theprincipal beneficiaries.

Third, for as long as the restrictionsexist, resources will be vested on lobbyingfor their removal. The associated costs arenot trivial either. Premiers and Ministersmust make many decisions which affectthe well-being of our society. The morethey make, the more hasty and lesssatisfactory those decisions are likely tobe, so that it makes sense for them tominimise the range of things they dealwith, concentrating on those which arethe more important. By trying to do toomuch, governments incur the danger ofdoing little well. Thus they generate

dissension and dissatisfaction in thecommunity, which, in turn, bringdisrespect on political institutions.

Of course, dealing with issues such asregulation of trading hours involves manypeople other than politicians. Officialinquiries require teams of expensivebureaucrats and lawyers, and the time ofmany other people. Removal ofrestrictions would free such people formore productive activities. The restaurantindustry seems none the worse, andindeed much the better, without theinvolvement of an array of politicians andbureaucrats to determine the hours atwhich they trade.

It is not the business ofgovernment to determinewhen people should shop, anymore than it is its business todetermine when they shouldbuy a meal.

Fourth, there is the ethical question ofwhether it is the business of governmentsto interfere in trade between individualswhich inflicts no harm on others. If moralindignation is raised when governmentsinterfere with people's desires toterminate pregnancies or to watch motionpictures of their choice, why should wenot be even more outraged to have ourshopping time censored?

Finally, why advocate completederegulation rather than partialderegulation, say, to permit shopping onSaturday afternoons? The answer istwofold. If there is partial deregulationnow, at some time in the future, perhapsseveral decades hence, the same set ofproblems will recur as pressures mountfor further deregulation. The community


will be faced with a repetition of the sortsof disruptions which will be experienced ifSaturday afternoon shopping isintroduced. We have seen this happen inthe liquor retailing industry where StateGovernments have made piecemealadjustments to hours of trading. On theother hand, in the ACT theCommonwealth Government deregulatedhours of trading completely and madeliquor licences freely available, makingCanberra a more pleasant place in whichto live and, incidentally, eliminatingfuture wastage of resources on lobbying.Proprietors of the multitude of newtaverns which were established, their

employees and consumers seem delightedwith the outcome.

It is not the business of government todetermine when people should shop, anymore than it is its business to determinewhen they should buy a meal. The logicaloutcome of many governmentinterferences in economic affairs,however well-intentioned, is severedisruption in the lives of people andbitterness in the community at some timein the future, perhaps many decades later.Wider recognition of this, both bypoliticians and within the communitygenerally, is long overdue in Australia.

Geoff Hogbin has prepared a majorstudy on the economics of retailtrading, which will be published bythe Centre for Independent Studies,Orders for the book can be placedwith the Centre (P.O. Box 92,St. Leonards, 2065) or telephone(02) 438 4377.


A Public Affairs Reading GuideWe have listed some books, articles and speeches which have come to our attention

and which may be of interest to "Review" readers.

Self-destructiveinstincts

A community which acts as if thosewho create the wealth are to be opposed,frustrated and loaded down withunnecessary costs is behaving irrationallyand self-destructively. Sir Arvi Parbo,Chairman of Western MiningCorporation, provided the followingexamples: -

.......Fifteen years ago, WesternMining Corporation brought theKambalda nickel mine into productiondealing with just two governmentdepartments. Today at Roxby Downs weare dealing with sixteen departments andnumerous other bodies and interestgroups."

"A delightful example of what canhappen was recently reported in theLondon "Daily Telegraph". TheDepartment of the Environment, underthe authority vested in it by the AncientMonuments Act, has decided that anallotment holder in the grounds ofFulham Palace, West London has to fillin a form if he wants to dig up any of hisparsnips, onions, leeks and carrots thatgrow more than eight inches deep. Theallotment holder has 60 such parsnips toretrieve, and has to fill in a separate formfor each of them. As reported, heintended to write 60 letters, eachrequesting one form."

Sir Arvi Parbo, The New FrontierAddress to Australian Petroleum

Association, 7th March 1983

Warning toGovernment

The supporters of smaller governmenthave had their ranks severely depleted inthe Federal Parliament, but they appearto have received a welcome addition in thenew member for Wakefield, SouthAustralia, Mr. Neil Andrew. In hismaiden speech he warned:-

"No matter how wise the Government,how well-intentioned its intervention, allthat it has to spend belongs to someoneelse. It is generated by people who havestood sweating in the sun, dipping sheep,painting buildings, working on buildingsites or construction teams or pickingfruit. It is generated by people who haveexercised some self-discipline intechnology and by people who have beenprepared to commit both their labour andtheir capital to some risky venture. "

"The disservice we do our constituentsevery time we intervene unnecessarily isfurther compounded when we rememberthat we take not only their revenue, theirhard-earned capital, but also theiraccountability. This would be excusable,if, as a Parliament, we had a monopolyon wisdom, but this has not proved to beso — not even under coalitiongovernments. Even governments with themost honourable of intentions cannot bewiser than men. "

Mr. Neil Andrew, House ofRepresentatives — Daily Hansard

May 1983, page 540


The Fraser YearsThere have been many articles assessing

the Fraser years. Dr. John Carroll'sarticle in Quadrant stands out for theoriginality of its analysis and the power ofits expression. He argues:

"The last Prime Minister should not bejudged principally by the achievements ofhis Government. To my mind they weremodestly substantial in the economicsphere, of singular distinction in foreignpolicy and immigration, and of variedsuccess in other areas. There will be plentyof opportunity for others to detail thisrecord. He should be judged rather by theauthority he gave to the State.....

.....A leader has to be both a rock indefence and the spearhead in attack. Hehas to be the Archimedean point, thecentre of gravity, that keeps his membersoperating as a single and purposive unit.In Australia we have been able to takesuch leadership qualities for granted forthe past seven years; we have tended toforget that in fact they are very rare. Weare due for an awakening. Indeed it isextraordinarily unlikely that ourgeneration shall see another PrimeMinister win three elections in a row."

John Carroll, "The Tragedy ofMarch 5th"

Quadrant May, 1983

Australian valuesThose opposed to free enterprise in

Australia have been far more energeticand effective in publishing their viewsthan those of other philosophicalpersuasions. The recent collection ofessays, `The New Conservatism inAustralia', is different from most of theofferings available in the bookshops. Thegeneral tenor of the book was summarised

by the editor, Robert Manne, at itslaunching:

"By the mid-seventies another layerhad been added to Australian society --perhaps it had always been there, butcertainly it was now much moreprominent and self-confident — the so-called "new class" of universitygraduates, the products of the rapidlyexpanded tertiary education of the`sixties. They were now presentthroughout many of the key institutionsof our society, and were dominant inthose — like teaching and journalism -where moral and social values weredefined and disseminated. Theirenthusiasms, certainties and causes wereeverywhere to be found. Their hatreds -America, Capitalism, Moral Puritanism,Anti-Communism — were expressedrancorously and consensually."

".....If much of this book is concernedwith an assault on the assumptions of theAustralian intellectual left, it is even moreconcerned, at least in my eyes, with thedefence of values, institutions and atexture of life."

Robert Manne, The New Conservatismin Australia, Oxford

University Press, 1982

Church and politicsBehind the falling community support

for many churches may be their increasinginvolvement in politics. A special reporton the changing attitudes to religionpublished in the U.S. journal, The PublicInterest, argues:—

"In the 1960s, a few more ofMiddletown 's churches developed anactive interest in public events. The clergyled the movement; their congregationsfollowed at a distance and with apparent

96 IPA Review • Winter 1983

reluctance. A line of fracture developedbetween "worldly" and "other-worldly"factions within the churches affected bythe change.

These internal conflicts wereparticularly sharp in the denominationsidentified as "business class", especiallythe Presbyterians and the Methodists.Working-class denominations, like theSouthern Baptists, the Adventists, and theAssemblies of God, were untouched bythe problem and grew thrivingly between1960 and 1980, while the Presbyteriansand the Methodists declined inmembership for the first time in livingmemory. The Catholics and theLutherans, wracked by the same issues,barely held their own in membershipwhile their church attendance and ritualparticipation declined. "

Theodore Caplow, "Religion inMiddletown", The Public Interest,

Summer 1982

State taxes andeconomic growth

Most state governments areexperiencing severe budget problems.Increasing state taxes and charges maywell be counter-productive, according to astudy carried out on fiscal policies of stategovernments in the U.S.:--

"An analysis of current state taxpolicies strongly suggests that..... taxhikes — whatever short-term fiscal reliefthey may bring — are likely to havedamaging long-term effects on theeconomic growth . of the states and

localities that adopt them. Theresults..... of a systematic comparisonbetween taxation levels and economicgrowth rates in the various states show astriking inverse correlation betweengrowth and taxation; overwhelmingly, thefastest-growing states prove to be thosewith the lowest taxes."

"..... the optimal state and local fiscalpolicy would be one in which the overalltax burden is comparatively low, couplinghigh sales taxes with low property taxes."

Richard Vedder, "Rich States, PoorStates", Journal of

Contemporary Studies,Fall 1982

The I.P.A. in historyThe role of the I.P.A. in the

development of social policy in Australiais examined in an article by Mr. Roy Hay,a senior lecturer in politics at DeakinUniversity. Concluding his examinationof the post-war reconstruction period Mr.Hay says:

If we look at the post-war worldand ask which scenario sketched for it inthe war years bears closest resemblance tothe reality, that of the Labor Party, thatof the administrative reformers led by Dr.Coombs, or that of the Institute of PublicAffairs, then there is not much doubtabout the answer. In very few respectswas the I. P. A. forecast off-beam. "

R. J. Hay, "The Institute of PublicAffairs and Social Policy

in World War Ii"Historical Studies, Vol. 20 No. 79

IPA Review- Winter 1983 97

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INSTITUTE OF PUBLIC AFFAIRS Review.€¦ · INSTITUTE OF PUBLIC AFFAIRS Review. Winter 1983 Vol.37 No.2 COUNCIL OF THE INSTITUTE OBJECTS SIR JAMES BALDERSTONE, (President) The Institute