Business

Engineering Freedom

Although softly spoken and polite, with a readily engaged sense of humour, Peter Fenwick (left) isn’t in the business of hiding his opinions. Shortly after I arrive at the offices of Fenwick Software on Southbank Boulevard—a professional services consultancy he founded and ran for thirty-five years before retiring in 2011 to pursue, among other things, the development of his political thought—he tells me that the New York Times’s Paul Krugman (Nobel Prize-winning economist and bête noire of libertarians) is smug and unconscionable. He quotes with approval a mantra—courtesy of his wife, a schoolteacher—he believes should be imparted to all teenagers: “There are no fairies to clean up after you.” For Peter Fenwick, it all starts with the individual. Responsibility is central.

Raised in Geelong, the product of a Catholic–Protestant “mixed marriage”, Fenwick worked in his parents’ family-owned general store from the age of six—learning values of hard work as well as respect for the dignity of each unique customer that passed through. He recalls his father scolding him for attempting a shortcut when organising newspapers for local distribution: he had written the initials of each customer on the front page rather than their full name—an affront to the customers’ dignity that Fenwick senior would not abide. The reason was simple because, as Fenwick now understands: “People’s names are important to them.” Mutual respect and reciprocity foster harmonious community ties, as well as better business.

This profile appeared in a recent Quadrant.
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Although not especially bookish themselves, his parents inculcated in their son an intellectual humility and respect for tradition. His father said to him: “If you have an opinion that is different to what everyone has developed over the past four hundred years, have the humility to realise that you’re probably wrong.”

After he imbibed the basics of classical liberalism at Geelong College, he studied engineering at the University of Melbourne, also running the debating society at Newman College. After university he worked for government in the Northern Territory, devising a computer model that would accurately assess inputs and outputs based on rainfall patterns, geography and so on. But as if to underscore his father’s teachings on respecting experience, he recalls that a much older engineer in Melbourne was able to produce off the top of his head the same assessment of the Northern Territory’s water needs as the computer model Fenwick had constructed carefully over six months. Trial and error—the empirical process—is often as good as, or better than, the abstractions of intellectuals.

He doesn’t recall exactly when he started reading classics of liberal and libertarian thought—works by Friedrich Hayek, Ludwig von Mises, Robert Nozick, Murray Rothbard—but by the time he founded Fenwick Software in 1976 the key ideas were pretty well in place.

So, what are the main ideas?

In 2014 Fenwick released The Fragility of Freedom: Why Subsidiarity Matters, a distillation of his years of political and economic thinking. “Subsidiarity”—the idea that decision-making should be made at the lowest level practicable—is the animating concept of the book and a tool to maximise the amount of personal responsibility at stake in any decision. If a decision can be made by a state government, it shouldn’t be made by the federal government; if a decision can be made by a local government, it shouldn’t be made by the state government; if a decision can be made by an individual or a voluntary association, it shouldn’t be made by a local government, and so on.

Fenwick conceptualises politics and economics as an engineer might—systematically—and believes that the greater the subsidiarity, the less chance that the system will break down. He writes of the idea:

It facilitates a wider range of solutions, quicker and more informed decision-making, and greater involvement of more citizens. Because there is a diversity of solutions there is less chance of one bad decision causing a systemic failure. Because there is more responsibility for one’s actions there is less opportunity for moral hazard.

Voluntary associations are at all times to be preferred to coerced associations. For Fenwick, individual agency leads to more stable social cohesion. In his book he quotes John Paul II:

By means of his work man commits himself, not only for his own sake but also for others and with others. Each person collaborates in the work of others for their own good. Man works in order to provide for the needs of his family, his community, his nation, and ultimately all humanity. Moreover, he collaborates in the work of his fellow employees, as well as in the work of suppliers and in the customers’ use of goods, in a progressively expanding chain of solidarity.

John Paul II pops up quite a few times in the footnotes to the book. Is Fenwick religious? No, he wouldn’t exactly say that. “John Paul II’s economics were spot on—it was only when he started drifting into theology that he went off the rails.”

His philosophy explicitly guides the operations and culture of Fenwick Software, whose primary work is implementing management and operations software tailored to clients’ needs. Included in their employee agreements, workers at the firm read the following:            

Fenwick Software is a consulting firm whose purpose is to help its clients, through the effective use of information and communication technologies, to strengthen their competitive position and to develop their businesses in a sound and profitable manner. You will participate in this work. You will be granted an appropriate degree of autonomy and will be responsible for your own actions. You will have opportunities to learn and to grow and to assume more and more responsibility. You will commit yourself diligently to apply all your skills and efforts to this end. Your primary responsibility is to provide value for your clients.

When he retired, he didn’t simply want to sell the company and be done with it. Instead, he instituted an employee shareholder scheme that dispersed responsibility and ownership—giving those he trusted most a vested interest in furthering the company’s vision:

I felt that I had spent thirty-five years developing something that was more important than just its financial worth. And so the employee shareholder scheme has enabled us to carry on the culture—so now we have six of the employees owning 75 per cent of the shares—and the culture has remained—and they behave ethically.

Behaving ethically and building trusting relationships in the best interests of workers and clients are central to the success of the firm. He hasn’t been afraid to “fire” clients if he believes they’re not operating in good faith with his consultants. Negative interactions with clients—for instance where the client isn’t taking the firm’s advice seriously, or is behaving abusively—will have negative repercussions through the rest of an employee’s work. He says such clients are usually shocked and disbelieving when fired, but that it’s better to lose a bit of cash in the short term in order to focus on long-term client relationships based on reciprocity and respect. The upshot is that consultants work for people they trust, and have a personal interest in seeing clients flourish.

He notes that recently a solution was brought to a client’s attention that might render Fenwick Software’s ongoing services unnecessary. Had they considered withholding the option? “It didn’t even come up!” he says proudly. It was the best solution for the client, so it was the solution they gave them. Ethical behaviour is underwritten by confidence in the firm’s creative and intellectual capacities; its ability to continue innovating and devising new solutions to new problems.

I ask whether subsidiarity and a strong level of personal responsibility are only possible with smaller firms; whether the guiding philosophy of the company might be compromised if it got too large.

He says he isn’t sure. He tried to expand the company but wasn’t able to expand it as much as he would have liked; but his successor as CEO, Greg Galloway, has been able to do what he couldn’t, which delights him. A key to running a successful business is to involve people who can do what you can’t. He muses that his epitaph will read: “That Fenwick was no fool—everyone he employed was cleverer than he.”

In any event, as the company grows: “We’re trying to keep it as unstructured as possible.”

Fenwick isn’t a political-party sort of person. And he doesn’t have much time for the current crop of politicians. Bill Shorten is a “hypocrite” who talks the solidarity game while funnelling union money into his own campaign coffers to further his political ambitions. Despite a wealth of pre-political career experience, Turnbull is fundamentally lacking the qualities of a great leader: “He doesn’t strike me as someone who’s made decisions, and suffered the consequences. He seems to avoid making decisions.”

If he had to pick an Australian politician he admired from the last hundred years?

“Keating—he was intelligent, witty, and he achieved things.” Keating was an economic reformer who achieved what he did because he wasn’t hidebound by old-fashioned Labor socialism. When he entered Parliament, he took the time to discover what he didn’t know: “I think one of his strengths was that he went out and asked people.”

He does give the Liberals their due though, for being receptive and not obstructive of those serious economic reforms. Listening to others in order to expose your ideas to criticism is an important quality, and something that he believes John Howard had over the current Liberal PM:

Howard would sit at the next available table. He would always have lunch in the dining room, and he’d sit wherever there was a space. Which meant that backbenchers met him, had five minutes with him—which they’d never get if they had to organise an hour meeting with him. Very clever. Very effective.

Do the Liberals have anyone now capable of that style of leadership? “The guy with the people skills is obviously Senator Cormann. He’s brilliant at talking the crossbench into voting for their policies and negotiating with them.”

While I didn’t ask who he would vote for at the next election, it’s easy to guess who he won’t be voting for: “I think the cricket thing”—the recent ball-tampering scandal involving Australian cricketers—“has forced everyone to think about values—and I don’t think that can be good for Mr Shorten.”

He’s not contemptuous of politicians as a whole, and he admires great statesmen such as Nelson Mandela and Vaclav Havel. But he thinks society should be structured so as to minimise political incentives to behave badly. This is readily apparent when it comes to infrastructure projects. As an engineer, he finds it ridiculous that politicians—who have no earthly idea as to what society needs in terms of infrastructure over the longer term—are the ones making decisions as to what gets built. Instead, politicians should set the amount of money to be spent each budget, and the decisions as to how that money is spent should be left to an independent statutory authority (composed of engineers and the like) who have the skills, long-term vision and pride in their own work to ensure that the money is used effectively.

Although libertarian leaning, he refuses any political labels. He’s not one to believe that every­thing should be left to private enterprise. He writes in The Fragility of Freedom:

There are infrastructure services such as the supply of water, sewerage, energy, communications and transport that may need to be monopolies and the community may need [compulsory] acquisition of land to enable provision. While commercial operations delivering services will use infrastructure, water and sewerage pipes, energy and communications transmission lines, highways and railways are probably better served by statutory authorities controlled by the state. Free market supply is possible but fraught. The US railroad experience was an early example of crony capitalism, which enriched the villains with land grants and did not deliver good services or value to the public.

I ask him for some quick opinions on current issues. Apropos of Russia and China, he confesses that although interested in foreign affairs, he hasn’t thought as deeply about such issues as he has about domestic ones. His general theme is that we should treat other countries as “friends” and “not assume that they have ulterior motives”. He thinks the West should perhaps be easier on Russia and try to see things from their perspective—taking a longer-term view of their interests and actions with respect to places like Ukraine and Crimea. Same goes for Chinese interests, in respect of which he thinks America can be unduly antagonistic.

I say I think I’m more of a pessimist than he is regarding the potential for fruitful negotiation with some regimes. He laughs, conceding that by temperament he’s a bit of an optimist.

What, I ask, if China is misbehaving—stealing or forcing transfers of intellectual property; manipulating trade rules to their own ends by over-subsidising particular industries, and so on?

He says there’s probably a reason for taking strong measures with respect to trade and so on in the short term, but that in the long term free trade is better for everyone.

So he would countenance abandoning free-trade agreements in some circumstances to send a message?

He laughs. In most cases free-trade agreements are really regulated trade agreements anyway: “Free trade agreements are about the things that aren’t free trade.”

Where does he stand on the issue of drugs and drug liberalisation?

Like many libertarians, he’s sympathetic to the idea of some level of drug liberalisation. A believer in the dignity of the individual, he believes that an illegal drug trade can be a bad thing not just for the innocents who are caught up in it, but also for those dealing in drugs who can’t avail themselves of the protection of police and courts in difficult situations:

One of the problems with having an illegal drug trade is that people within that trade are not protected by the police or the court system. So if there are contracts broken, they have to sort it out themselves. And they normally do that by killing each other.

But he doesn’t believe in one-size-fits-all. Drug liberalisation, if it is to occur, should happen at a piecemeal pace rather than all at once—and the evidence of the effectiveness of each step should be measured before proceeding. Some drugs may need to stay illegal; some might be better dealt with as part of a legal regime. It’s a matter of the best use of scarce police resources.

Next up: monarchy or republic? “I can’t really understand why the monarchy works, but it does. It seems to be a good sort of civilising influence, this British system that we’ve come to—and the alternatives don’t necessarily buy you much.” If we were to become a republic, we’d need to think very hard about the best way to choose a figurehead that ensured stability and retained the best features of our current constitutional monarchy. He wouldn’t be in favour of a popularly elected president, although perhaps the people could “elect the electors” who might in turn make a bipartisan and sensible choice—avoiding an outcome where we have “a reality TV star or a porn star” as our head of state.

One of Fenwick’s primary concerns and preoccupations in his retirement is how best to educate the young, and to disseminate his ideas about liberty and subsidiarity to the next generation of thinkers and policy-makers. The standard of civics education is fairly dire and something needs to be done: “How can we live in a democracy where citizens making voting decisions have no idea how we got to this wonderful state that we’re in?”

Education, he believes, like health care, should not be the focus of the federal government. He notes that roughly 70 per cent of university revenues are eaten up in administration costs—leading to inflated fees for the young.

In advance of our interview I sent him a copy of Tony Abbott’s essay in the April Quadrant discussing the work of the Ramsay Centre for Western Civilisation. (The centre, set up with $3 billion from the late Paul Ramsay, is teaming up with the Australian National University and two other universities to offer an undergraduate degree in Western Civilisation—in order to provide an alternative to the deplorable curricula currently on offer at many of our eminent tertiary institutions.) “I really commend what they’re doing. I think it’s wonderful.” But, he asks, what does it say about the state of our public universities that you need the intervention of a billionaire philanthropist to reinstate traditional rigour in humanities education?

His own idea is to set up a scholarship fund to help young intellectual types get work experience at think-tanks in Australia and abroad. He thinks this might be a more efficient option than setting up a new think-tank or charity (“Setting up a charitable organisation is horrifically complex”) and a good way to arm a new generation of youngsters with ideas that will benefit not only themselves but the entire Australian community.

Rather than directly intervening in the political process—through, for instance, setting up a minor party—he believes the best route is to “win the hearts and minds” of people with fresh policy ideas, and gradually have them win influence within the dominant two-party structure. Think-tanks he has in mind for the scholarship include the Institute of Public Affairs in Melbourne, the Centre for Independent Studies in Sydney, the Adam Smith Institute in London, the American Enterprise Institute in Washington—among others.

We’ve been talking for several hours now, so I decide to finish up the interview by asking him what he would do tomorrow policy-wise if he could—to get the ball rolling on his ideal society. Naturally he’d start by devolving more power to the states—greater subsidiarity:

I think I’d start with federalism. Try and get more responsibility back to the states … so that they had to fund the things that they were responsible for. So that when they go to the election they say: “We’re going to provide all these benefits—build more hospitals, build more schools, increase the police force—and your rates are going to go up to pay for it.”

He also likes the idea of creating more states and more opportunities for local government—although he admits this is rather harder to do.

And what political issue concerns him the most at present?

“Attacks on freedom of assembly.” He deplores the increasingly disruptive behaviour on campuses and at public events—and the unwillingness of the authorities or university administrators to take on rabble-rousing far-Left agitators.

He believes student unions are suppressing the speech of those who don’t subscribe to an increasingly parochial leftist agenda. After an event was cancelled at the University of Sydney, he complained to the vice-chancellor. Surely the vice-chancellor could intervene to ensure a diversity of opinions was allowed? The response—communicated through one of the vice-chancellor’s underlings—was, in effect, “Don’t blame me.” The decision was said to be that of the student union. The university bureaucracy was thus able to wash their hands of the issue.

Not a particularly responsible attitude, it must be said. Not the kind of thing that would be tolerated on Peter Fenwick’s watch.

Peter Fenwick’s books, The Fragility of Freedom: Why Subsidiarity Matters and Liberty at Risk: Tackling Today’s Political Problems, are published by Connor Court. Edward Cranswick, a Melbourne writer, tweets at @edwardthecran.

 

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