The Year 2014: Governments and Corporations – Are they Fit for Purpose?

Last year 2014 was one of the most difficult years Australians have faced in peacetime. It is a year in which a government showed itself incapable of governing and the citizenry by and large made clear they were not prepared to be a party to an attack on the economy of those less advantaged, especially when they were told the policies would be fair.

So, the following constitutes a kind of end of year rave about Australia and the world at this time. It started out as a commentary on the response to friends about the article of last May by Warwick Smith in The Guardian on the budget: number of economists who agree with government economic policy? Nil.

This post was published on my website December 30, 2014 

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The Abbott-led Opposition had consistently criticised the Gillard government as illegitimate and non-functional when it was in fact legitimate (as are many coalition governments around the world) and was able to pass substantial amounts of legislation, albeit not all representing the best that could be put in place. In government, Abbott faced trouble from cross bench Senators throughout the year, passing little legislation.

Government claims of a welfare crisis were undermined by a Household, Income and Labour Dynamics in Australia (HILDA) Survey by the Melbourne Institute of Applied Economic and Social Research report that has tracked more than 12,000 people since 2001. The Survey showed working age Australians have become far less reliant on welfare payments since the turn of the century. As Peter Whiteford,Professor in the Crawford School of Public Policy at the Australian National University pointed out, Australia has the most targeted social security system in the OECD and that total social security payments in Australia, at 12 per cent of average household income, are the third-lowest in the OECD. Strategies aimed at getting more people on welfare, including youth and those receiving disability benefits, into work have nothing to say about job creation!

The Prime Minister Tony Abbott ended the year in very bad shape and indeed Treasurer Hockey is said to have failed. Many have been the commentators giving vent to their views on that: I don’t need to here. I have in recent posts. Except it is worth recalling that, on gaining office on September 8 2013, Mr Abbott declared the  Nation “open for business”. Instead business confidence weakened, terms of trade declined and the deficit grew. There are multiple reasons which only shows the folly of making grand predictions about financial outcomes!

I do want to point out that the posts on this site have changed from ones that commented in a perhaps fairly staid manner on various issues to increasingly strident condemnation of trends in Australia and more generally. Apart from failures in education in many places the overwhelming failure has been in respect of climate change, though the outcomes of the meetings in Lima atd the end of 2014  perhaps give some hope.

It is fair to say that Australia is involved in conflicts in the Middle East which probably have nothing to do with Australia, or more correctly are unlikely to solved by our intervention or indeed the intervention of any outside power, hideous as the situation is.

Immigration has become a nightmare which decent Australians find appalling, policies based on lies, as pointed out by many including Julian Burnside, Malcolm Fraser and Sarah Hanson-Young, and a level of meanness which is hard to imagine.

Consider this contrasting decision: “Sweden has become the first European Union country to announce it will give asylum to all Syrian refugees who apply as reported by SBS for instance. “All Syrian asylum seekers who apply for asylum in Sweden will get it,” Annie Hoernblad, the spokeswoman for Sweden’s migration agency, told AFP. The agency made this decision now because it believes the violence in Syria will not end in the near future.” The decision, which will give refugees permanent resident status, is valid until further notice, added Hoernblad.”

The government has pursued energy policies totally at odds with any verifiable facts: carbon emissions were decreasing before the carbon tax was repealed and have increased since then with brown coal being burned in much higher amounts. Declines in household energy consumption and in petrol prices have delivered significantly much more financial gain to people than any action of the government. Energy retailers have been profligate – spending some $40 billions on infrastructure that will never be needed – and the Energy Regulator lacked discipline. The arguments for a reduction of the Renewable Energy Target (RET) are merely a sop to retailers and coal miners. (The actions of the Victorian State government in promoting urban transport infrastructure in a process which concealed the lies underlying the asserted outcome and unnecessary desalination infrastructure are similarly egregious.)

Government policies on health are utterly irrelevant. A co-paymdent has nothing to do with maintaining a healthy citizenry and the proposed $20 billion dollar research fund does not address chronic disease. Anyway the health minister was shoved off to Immigration in the December reshuffle whilst Social Services are to be subject to the discipline up to now imposed on Immigration. No hint there of increasing revenue other than further arguments about the regressive GST bolstered by ongoing assertions from Western Australia.

Proposals for funding education so that the major issue of disparities in advantage would be reduced have been trashed in a welter of lies and misrepresentations. Why hasn’t the media reported these two comments by the chair of the panel, the redoubtable David Gonski in his Jean Blackburn Oration to the Australian College of Educators?

“I found most of the schools happy places – places of potential but where there was disadvantage the problems were clear and marked.

“To this day I remember a principal at a primary school in a very low socioeconomic area in the west of Sydney looking at me when I asked had he had any success in getting parents involved with the school. He noted that 40% of his student roll changed each year and that getting the kids to school within an hour of commencement each morning was his personal goal for the year – involvement of parents he had tried but just at the moment felt it was too hard.

Continuing to talk of what he saw, Gonski noted, “The outstanding professionalism of both the leaders of the commonwealth department involved in school education and a number of the equivalents in states.

“I confess that my un-researched approach was to assume they were the problem and that bureaucracies were crippling getting on with the job. I did not witness that in actuality at all and indeed saw the opposite. The people I met, who dealt with me, were on the whole open to change, experienced, intelligent and well-meaning. In my view we are lucky to have them.

“I should also mention that dealing with the representatives of the various sectors be they from the catholic system, the independent school sector, the education unions and others was a pleasure. All had designated views and agendas but all dealt with us cooperatively and constructively. This I found very reassuring for the future – and I take the opportunity of this “postscript speech” to thank them.”

Despite evidence that universities are vitally important but that there are needs for improvement in teaching and that for reasons not explained large numbers of graduates have difficulty finding jobs, the government adopted policies for higher education that, like those for schools, had no basis whatsoever in evidence, were promoted by focus groups (which are relevant to what?) at great cost and advocated through an advertising program which did not mention the great cuts to research funding.

And the ABC and SBS had their funds further reduced. Like CSIRO, excuses were made and the issues ignored and the blame avoided. That any government concerned for education and an informed citizenry and future prosperity would of necessity generously fund scientific research and public broadcasting escapes these people. The ABC and SBS deliver an extraordinary array of material of extremely high quality. But as ABC’s Mark Scott has said the focus is on some small part of what they do. Skilled and experienced people left. Skilled and experienced scientists continued to leave CSIRO after a plethora of reviews over more than 25 years. In both places corporatisation has delivered exactly what?

The greatest tragedy of the budget, though in this sense the present government is not completely different only much worse, is the way it has ignored the major challenges facing humanity. Those will always be argued about but inequality, addressed by CEO of the IMF, the Governor of the Bank of England and French academic Thomas Piketty as well as a host of others, immediately comes to mind.

Of the many excellent reports of those challenges, the Oxford Martin Commission, “Now for the Long Term”, chaired by former Director-General of the World Trade Organisation Pascal Lamy (and including an astonishing array of internationally respected economists, specialists and political leaders) can be mentioned. And there are several insightful reports from the United Nations and the OECD. When Lamy visited Australia mid-year the Commission’s report received media attention only from the ABC and he met no government Minister! I don’t know if he met any business group. His talks in capital cities were booked out. (The visit was promoted by the Centre for Policy development.)

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Here are three recent tweets of mine, relevant to the above, that those who do not tweet will have missed (no doubt to the relief of some):

Try this. If scientific organisations employed methods of banks & corporates astronomy would hardly have advanced beyond Galileo. More

Try this. If scientific organisations employed methods of banks & corporates we wd b drawing blood 2 cure illness. DNA search wd b 2 risky!

Advances gain f prev unknown knowledge & skills. Instead of colonisation & takeover try join w others 2 leverage knowledge Mkt econ model NO

If the meaning of these ravings are not clear, I can explain. I consider that banks and too many (not all) other corporates are engaged, not in innovative solutions to advance society, but simple behaviours merely to enrich a few people who fund them.

After all banks have gotten into trouble because they did things like decide to reward people for lending money without any regard to whether the loan would likely be repaid; they could have decided to reward only those who had made successful loans. Even better they could have engaged with a multiple of reinforcing goals such as “advance economic performance whilst encouraging innovation in pursuit of improving the health of minorities (or even the middle class)”.

Consider the recent behaviour of the ANZ bank (whose chair is a climate change denier) which bought an investment vehicle at a knock down price and then pursued the debtors, closing their mortgages if they missed one payment. These are farmers: what were National Party politicians like Barnaby Joyce doing? Answer: nothing!

The chair of the National Australia Bank Michael Chaney recently said that banks had a duty to fund the mining of coal! This is even more stupid than Abbott’s comment that coal was good. Banks have no obligation to fund anything other than what is consistent with their goals and prudent. Chaney was once chair of the Business Council and advocated then, as the BCA still does, nonsensical views about financial incentives driving teacher performance and test scores representing teacher competence.

The behaviour of the Commonwealth Bank is well known.

For the rest, consider corporate failings and illegal behaviours. I have a list.

As to colonisation and takeovers. The first thing to recognise is the huge cost over time. Most of these ventures are loss-making.  Consider Vietnam and Algeria, not to mention French and British interests in the Middle East. (The British betrayed those who gave their support to the defeat of the Turkish forces in WW1 and British and French representatives divided up the land as they had in Africa to suit themselves.) The present insurgencies in Syria and Iraq represent the ongoing return on investment by those powers.

All colonised peoples have knowledge and skills of great value which are completely ignored and supressed so that the people can be applied to the simple tasks of working at little or no wages in enterprises which the colonizers have dreamed up as appropriate to achieving their own ends. Such as ground nut farming in East Africa. (See the history of pioneer ANU anthropologist Bill Stanner whose writings were recently edited by Robert Manne, the novel and play “The Secret River”, Bill Gammage’s book, “The Biggest Estate on Earth” and “Into the Heart of Darkness”, etc, etc)

Most company mergers in the end benefit only the lawyers who arrange the mergers and a few people who get “success fees”. What generally follows is downsizing or, in other words in not a few cases, at least temporary unemployment sometimes leading to worse. The simple solution to “wealth generation” is followed: cut the costs by increasing the margins which results in increase in the stock price which, since the “investors” leverage their borrowing against stock, represents a considerable gain for them. When they have made enough they sell on the company which by now is diminished. All a result of companies considering the main role to be generation of wealth for their shareholders rather than providing needed goods and services to a specific market.

The boards of such merged companies often contain no person who actually knows anything about the business; the directors are rewarded with large fees, a process which makes virtually no difference to performance as has been demonstrated by research on behavioural economics. Employees are hired by another company so the principal company doesn’t have to worry about the workplace conditions. And employees are engaged in whatever country pays the lowest wages with little or no regard to conditions of employment or any sense of decency. (See ‘Why Work Is More and More Debased’ by Robert Kuttner in New York Review of Books October 23, 2014 reviewing ‘The Fissured Workplace: Why Work Became So Bad For So Many and What Can Be Done to Improve It’ by David Weil and ‘Private Equity at Work: When Wall Street Manages Main Street’ by Eileen Appelbaum and Rosemary Batt.)

The very much more productive alternative would be for companies to merge when each recognises the other has experience and skills which the principal company, or both, lacks but has identified as critical to its progress. What would follow is not sackings but a period of considerable training and development of all staff in the new company in the areas critical to success. Those asked to leave are only those who reveal that they are not comfortable with the nature of the new business. (IR policies rest on best practice as revealed by best research and law.)

If this seems too much like naïve and ignorant nonsense answer this question: how has the European Space Agency managed to land vehicles on a moon of Jupiter and a comet, a process which in each case involved hundreds of scientists from many different countries over a very long time? And how did they get the Hadron Super Collider to “discover” the Higgs particle? In the latter case the machinery broke down at one point: 3,000 scientists and technicians worked at fixing it! How have the hospitals which are expert at managing the most critical medical problems got to be that way? (This year’s Reith lectures by Michael Gawande give a clue about managing complex problems such as bringing back to life persons severely injured and seemingly dead after accidents. A clue: the answer isn’t money or competition. You guessed it, it is cooperation!)

Compare the ESA achievements with the relatively simple tasks of rolling out the NBN, installing pink bats, putting in place a universal ticketing system for Sydney’s public transport system and – yes I know that is very much more difficult than putting a decent education or health system in place against the wishes of entrenched privilege) – transiting to a low carbon economy!

The fact is that the politicians and the corporate boards we have in place are not fit for purpose, mainly through intellectual laziness and an overwhelming belief that what they have been brought up to believe is the eternal truth. The influence of those in leadership positions is followed almost unquestionably until they are found to be no longer of use! Sensible decision-making requires constant challenge and exposure to alternative views!

Almost none of these people would dare to consider the proposition that we would all be better off if there was a substantial reduction in inequality, if those on the margin, especially indigenous people*, were granted the dignity and recognition to which they are entitled including equitable access to the judicial system, if the poor were adequately housed rather than living on the street and the seriously disadvantaged cared for, if drug addiction were treated as an illness and not a crime, if children were encouraged to play by themselves unsupervised as part of their learning, if test scores at school were abandoned because all that can be measured is of little consequence, if investment in childhood education was considered the key to the future, if health care were paid for through taxes because the net gain to the community at large is positive over the longer term, if public transport, urban planning and health were recognised as fundamental to a just society and to gains in other areas, if industrial relations were recognised as constituting the processes for mutual satisfaction of competing wants in the alternative village that workplaces are, if investment in scientific research, certainly not economic growth or population growth, was recognised as the principal driver of future prosperity broadly defined. And if the military had to run cake stalls to generate the funding for their weapons!

I believe these are amongst the most important and critical issues. The economy is not the principal issue, at individual, family, local or national or international level. Writers like the Australian sociologist Hugh Mackay have been saying this for some time and so have many people who have pointed to the importance of issues beyond the economic.

In his commencement address at American University Jine 10 1963, President John F Kennedy said, “So, let us not be blind to our differences–but let us also direct attention to our common interests and to the means by which those differences can be resolved. And if we cannot end now our differences, at least we can help make the world safe for diversity. For, in the final analysis, our most basic common link is that we all inhabit this small planet. We all breathe the same air. We all cherish our children’s future. And we are all mortal…”

I finish with some of my favourite quotes. They come from the 2010 Deakin lecture by Tim Jackson, Professor of Sustainability at the University of Surrey. (Jackson is featured on TED. One of the first actions of the UK government of David Cameron was to dismiss the UK Sustainable Development Commission: the parallels with Australia will be obvious.)

“The concept of prosperity as an ongoing drive for growth is inconsistent with human nature. … prosperity has a meaningful sense that isn’t directly about income growth. It’s about the health of our families. It’s about the trust of our friends. It’s about the security of our communities. It’s about participation in the life of society. It’s about some sense perhaps of having a meaningful life and a hope for the future…

“We evolved as much as social beings as we did as individual beings. We evolved as much in laying down the foundations for a stable society as we did in continually pursuing novelty…”

Some of these ideas are explored in my book “Education: the Unwinding of Intelligence and Creativity” (published early this year by Springer) and in other posts on this site.

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Indigenous Australians fought in both world wars: they enlisted only by concealing their racial background. When they returned they were granted no benefits accorded to non-indigenous returned soldiers, not even able to enter RSL clubs. Their names are not inscribed on the honour rolls of the Australian War Memorial. (The huge turnout at a ceremony arranged by descendants of these people gives the lies to the proposition that symbolic gestures are of no significance and that what matters is practical reconciliation, in other words assimilation!) This was revealed in a Summer Special program on ABC RN on December 31 2014, and enterprise which as I have said, like most other things of value is being trashed by the present government.