Monday, June 23, 2014

How can desirable economic reforms be pursued more effectively in Australia?

Soon after the Abbott government was elected, I speculated on this blog that it could end up looking quite similar to the Fraser government which held power in Australia from November 1975 to March 1983. It seemed likely that there would be plenty of tough talk without much economic reform.

Perhaps I should apologize to Tony Abbott and Joe Hockey. The government has made some tough decisions in its first budget. I don't endorse everything they have proposed, but it is good to see a government proposing action to deal with a looming problem before a more painful adjustment becomes unavoidable.

Nevertheless, it still seems quite likely that the end result will be tough talk and not much action. These days the budget speech is just the starting point of a political negotiation. The final outcome is likely to be strongly influenced by minor parties in the Senate, which are seeking to increase their popularity by fanning the flames of interest group opposition to spending cuts.

The minor parties only pose a problem because the government does not at this stage have strong public support for its policies. Minor parties do not like to be seen to be obstructing popular government initiatives.

In an article in the Australian Financial Review a few weeks ago (May 28, 2014: ungated version here) Ian Marsh suggested that adverse public reaction to the budget reflects a more fundamental problem which afflicts any government trying make bold reform. He gives several examples: 
“The Resource Super Profits Tax was released in May 2010, and was followed by a public opinion firestorm which unseated Kevin Rudd. WorkChoices led to the downfall of John Howard’s government. Refugees and climate change destroyed Julia Gillard. Earlier, John Hewson was undone by Fightback and sponsorship of indigenous reconciliation and a republic contributed much to Paul Keating’s defeat. In all cases, an unprepared public opinion delivered a populist verdict.”

My problem with that list of examples is that I think public opposition was justified in some instances.

Nevertheless, I think Professor Marsh is on the right track when he suggests:
“There is no infrastructure through which more complex political narratives can be aired or debated. Political leaders have almost no capacity to build a supportive public opinion for significant policy change.
There is only one recent exception: John Howard’s sponsorship of the GST. He won the ensuing election but lost the popular vote. It was a dangerously close call.”

If we had adequate institutional infrastructure in place it might help to ensure that governments propose policies that deserve public support, as well as helping to promote broader public understanding of the need for policy changes.

Marsh seems to be correct in claiming that big policy change requires a solid base in public opinion, or bipartisan agreement. He noted that the big parties broadly adopted the same economic rationalist program during a short period of “acknowledged crisis” between 1983 and 1993. But bipartisan agreement evaporated after the crisis receded:  
“After 1993 the crisis receded, and normal politics resumed. But differences between the parties had narrowed. So how were they to distinguish themselves? Opportunism and manufactured difference were the new currencies of debate.”

Ian Marsh endorses proposals for a change in the role of the Senate to create the public conversation needed to build a support for significant policy change:
“The late Liberal senator David Hamer suggested converting the Senate to a committee house with ministers no longer appointed from that chamber. The Australian Senate would be more like its American progenitor. At present this seems the most likely path for the needed reform”.

However, I find it hard to see how that proposal would promote better outcomes. Despite its admirable Senate, the US seems to have even greater problems in pursuing desirable economic reforms than we do in Australia.

More radical change is required if we want Senators who are capable of getting beyond party political opportunism and the representation of narrow interest groups (including wealthy individuals). In my view we should consider a system of selecting Senators that has less political party and 'big money' involvement. For example, Senators could be chosen using a two stage process:

  • Sortition (random selection) could be used to select candidates from volunteers who have the written endorsement of a minimum number of voters (e.g. 100). 
  • Approval voting’ could be used to weed out those whom the electorate considers to be least likely to make a useful contribution. 

Even if the Senate played a more constructive role, however, we would still need political leaders who are willing to take unpopular decisions.

Postscript 1:

I have been asked whether the change proposed in selection of Senators would require a constitutional amendment. I don't think it would, although I do not pretend to be an expert in such matters. The Constitution provides:

"The Parliament of the Commonwealth may make laws prescribing the method of choosing senators, but so that the method shall be uniform for all the States" (Section 9).

The proposed change would, of course, require the support of the major parties, but that is not impossible.

Postscript 2:

Ian Marsh has responded as follows:

"I accept what you say about the US. Our political world is different. The argument is developed at much more length in my 2012 book Democratic Decline and Democratic Renewal. In an earlier study (1995) I had a detailed account of how a similar system worked prior to the emergence of the two party system in 1909 (Chapter 10). That first decade of federation is my template. I am not opposed to random selection etc. I just think its so far from the norms of representative democracy that it won't happen - at least short of some major crisis and/or decades of the development of public opinion. Deliberative democracy (on which this idea is based) is to my mind an invention of the US where the structure of power is frozen by the constitution. In Australia (and Britain and NZ) these things are governed by convention. Thus there is a possibility of peaceful change from within. That's what happened in 1909. Regards, Ian."

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