Liberals – Whither goest thou?

One of my favourite ditties opens with “I know where I’m going, I know who’s going with me” (the young Scottish lass is singing the virtues of her “handsome winsome Johnnie” who she is longing to marry). While it’s pleasurable to hear such verses from time to time, many are increasingly asking whether the current leader of the Liberal Party knows where he is going and who he can take with him – particularly any with a capacity to develop and promulgate worthwhile policies. 

The essence of the problem is the lack of any coherent set of policies that might convey what kind of society the Party considers Australians should have and how that might be achieved. To an outsider there is excessive focus on day to day issues, for which Malcolm Turnbull’s financial market expertise should be suited (although his capacity to handle day to day political trading is open to question). One wonders whether this approach is a reflection of a recent political thesis implying that political leaders are now focussing more on establishing power positions than pursuing philosophies (more on this below). 

The policy problem was highlighted during the week when, out of the blue, Turnbull took the plunge on the workplace relations policy devil that has plagued the Opposition since the election loss widely attributed to the Howard government’s Work Choices policy. So what was the Turnbull plunge? In a show of bravado the Opposition leader suddenly expounded the view that he neither ruled in nor out of Liberal workplace relations policies a role for individual contracts! This opened the worst of all possible worlds, making the party vulnerable to attack and reportedly forcing Turnbull to immediately back track. He should have either continued to reject any such approach or have committed to it on a basis different to Work Choices.  

It is little wonder that such indecisiveness and focus on the short term has produced restlessness in Opposition ranks about what the party stands for, highlighted in Brendan Nelson’s farewell address. And concern that it allows the Government to use Question time in the House largely to promote its own policies. 

Interpreting the present policy line is the more difficult when there is only limited availability of written material on policy issues. This suggests either inadequate professional staff or a reluctance to address substantive issues – or both. And one wonders what role the Liberal Party secretariat is playing. Is it too much to expect that after a year in office Turnbull should have issued at least the outline of a policy approach? 

Looking at the situation from the perspective of an outsider there are some key issues deserving of attention. 

I start on the basis of my belief that the Liberal Party should not only continue to have a platform of small (er) government but should actually identify measures to achieve it. I was encouraged to hear Shadow Treasurer Hockey confirm very recently (but in TV interview) that Liberals “are strongly opposed to the government being the centre of everyone’s lives” and he even nominated an objective of reducing government spending to around 24 per cent of GDP (with the recession and stimuli it is currently over 28 per cent). But 24 per cent was the level the Howard Government finished with and that was only fractionally lower than at the end of Whitlam. And Howard actually increased the burden of taxation by about 2.5 percentage points of GDP. 

As yet the current smaller government Opposition has done little to explain to the electorate how that might be achieved and the tax reform paper it commissioned remains unpublished. But achieving smaller government requires a lot of (advance) explaining to the electorate. Little sign of that has emerged. 

True, the Opposition has invested considerable political capital in attacking the additional government spending designed to stimulate the economy. Some would describe that as courageous in circumstances where every other country was (is) doing it and every international institution supporting it. From a political perspective that demanded a carefully calibrated in-depth attack that the Opposition’s ministry seems unable to produce. True, the ministry did correctly highlight the poor quality of much spending, and the failure to publish promised cost-benefit analyses of infrastructure approvals. But more questions could have been raised about why such large fiscal measures (at 5.4 per cent of GDP the third largest amongst OECD countries) were needed, if indeed they were needed at all, and about the importance of minimising deterrents to the revival of the private sector (more on this below). 

For a start, the fiscal and monetary inheritance passed to Labor by the Howard government (which left no net government debt and levels of private debt relative to income lower than overseas) argued for (at least) much smaller fiscal action than in overseas countries where the recession originated. That conclusion finds support from the “emergency” below-neutral interest rates established by the Reserve Bank, the relatively strong balance sheets of Australian banks (thanks again to Howard/Costello), and from the holding up of exports to China (and fiscal stimulus cannot produce exports anyhow). 

In addition, more questioning could have been directed at claims that government spending “saved” many thousands of jobs that would otherwise have been lost. Similar claims in overseas countries have been negated by higher than modelled unemployment ie the stimuli there have not effected the modelled reductions in unemployment (does anyone now give credibility to outputs of economic modelling in recessionary situations?). Yet last week the published modelling of Australia in the OECD’s Employment Outlook (doubtless “cleared” by the Treasury representative in Paris) was acclaimed by the Government. This purports to show the “saving” of 150-200,000 jobs – equivalent to a lower than otherwise unemployment rate of around 1.5 per cent. But even if the modelling were accepted, is it fiscally responsible to incur such a high cost per job saved ($320,000 to $450,000)? Additional temporary assistance could possibly have been provided at a lower cost through the existing social welfare system whose object includes the provision of assistance to those who become unemployed due to a slow down or fall in economic growth.  

Moreover, in existing economic circumstances the argument could have been much more strongly put by the Opposition that the less that wages and conditions are regulated the more employees the private sector will absorb and the less unemployment will rise. The increased “flexibility” espoused by the Coalition is one thing but why not propose some specifics, such as (at a minimum) the deferral of the introduction of the modernised (sic) award system until the economy is back to trend growth. References could also have been made to situations overseas in which some workers have accepted reductions in wages in order to retain their jobs (in Australia the reduced hours worked by some have the same effect). The consistent acknowledgement by the Government that unemployment will continue to rise (and its refusal to make any downward revision to the official forecast of an average 8.25% for 2009-10 and 8.5% for 2009-10) arguably provided an opportunity the Opposition missed badly. 

On workplace relations generally, the Opposition appears to have been slow in predicting the virtually certain problems likely to arise from Labor’s re-regulation of employer-employee relations involving the transfer of quasi-monopoly power to the unions as well as to quasi-judicial institutions who under the pre-1996 arrangements consistently brought down decisions favouring unions and neglecting lower skilled workers. Indeed, despite the ample evidence available, until very recently Minister Gillard was given virtually a free ride to sell the absurd line that the new legislation would increase productivity and that there would be no more employer “rip-offs”. Nor did anyone seem to question her view that the supposed “rip-offs” were the payment to a relatively small number of employees of wages below rates determined under awards made by the quasi-judicial institution that (once again) has showed itself incapable of setting wages on an economic basis, let alone on a basis fair to the lower skilled. The awards that provided the basis for the rip-off allegations were wide open to questioning that never eventuated. 

That Gillard was allowed to get away with this presumably reflected the defeatist view taken by the Liberal Party, and promulgated by both Labor and (naturally) the biased media, that this was what Labor won in the election and was entitled to implement. But leaving aside the impossibility of identifying specific election mandates (debate continues on why the Howard government lost), the Liberal Party lost an enormous opportunity for exposing the many serious potential problems with the legislation and thereby laying the ground work for the components of a future Liberal policy. 

At the very least the Coalition should by now have promulgated a view that, whatever the position in the distant past, the Australian labour market is not susceptible to exploitation in any meaningful way. The fact that over 800,000 employers compete for labour prevents dictation of conditions by employers because employees have alternative opportunities. Indeed in a normal year well over one million workers leave their jobs voluntarily. Such facts are available for all to see and could have been used by Turnbull to explain the rationale for a policy supporting individual contracts. 

Global warming is the other main issue on which the Opposition has presented a weak policy position and on which Turnbull has been tortoise-like in failing to recognise the importance of developments since he became leader. I have already written about these (and associated aspects) in greater depth in Quadrant Online (see Global science or global panic?) and will limit my comments here.  

My exchanges with Turnbull when Environment Minister under Howard suggested his position on global warming was a pragmatic one and, on that basis, recent developments should have led him to change the ready acceptance under Howard of an emissions trading policy. These developments include the widespread increase in expressions of sceptical and dissenting views by expert scientists and others, the increased exposure of mistaken analyses by the global warming believers (including by “expert” advisers to Minister Penny Wong), the shift to majority scepticism in opinion polls in the USA and the continued cooling in recent years signalling that there is no need for urgent action. Indeed Rudd’s postponement of the start of an ETS provided an opportunity for Turnbull to adjust his approach. Yet neither Turnbull nor any of his ministers seem to have been able even to raise questions about any of this. Does Turnbull have the national interest in mind or might he be kow-towing to a Business Council whose membership appears to have a (majority) self-interest in an emissions trading policy? 

At the very least these opportunities should have led to a policy stating that any decision by the Government on an Australian emissions reduction policy should be delayed until after the Copenhagen outcome could be assessed. It is totally absurd and irresponsible for the Prime Minister of Australia to say Australia will go ahead regardless of whether there is a meaningful global agreement and it is difficult to believe that Rudd could pursue a double dissolution election with that hanging over him and with the other developments reinforcing serious doubts about the science and urgency. Turnbull could have also – still could – used the advice to Senator Fielding by four expert Australian scientists that an inquiry needs to be held into the science because “proper due diligence … can only be achieved where competent scientific witnesses are cross-examined under oath and under strict rules of evidence”. Would Rudd fight an election over a delay by a Senate seeking a proper inquiry into the “large uncertainties in the science” publicly acknowledged by Professor Garnaut? 

Consistent with Alan Oxley’s analysis in his excellent Stan Kelly lecture of 17 September (A call to arms – the threat of Green protectionism), another possible opportunity for Turnbull would be to put Rudd on the spot by seeking his agreement that an essential condition of any international ETS be that the rules governing the international trading system remain substantively unaffected. As Oxley also points out, the potential for threats to that system to develop, and the “normal” lengthy time taken to conclude any international negotiations, makes it likely that any negotiations on a global climate change agreement would be long drawn out. Given Rudd’s strong support of international “coordination” (but the apparent unreality which he accords to prospective results) why hasn’t he been pressured by the Opposition to, for example, set criteria for Australia’s acceptance of an international agreement? Now Rudd is acknowledging that Copenhagen is unlikely to produce a meaningful result –another reason for delaying any decision on an Australian scheme. Another lost policy opportunity for Turnbull? 

It is difficult to avoid the conclusion that the Liberal Party has lost its way and is failing to recognise the challenges to the role of the individual in society and indeed to the role of independent private enterprise. Rudd’s portrayal of himself as “conservative” has turned out to be completely misleading. Through a wide variety of policies – ranging, to mention just a few, from the large government spending reaction to the recession, the supposed education revolution aka government spending, the protection from dangerous warming via (only) a government determined emissions reduction scheme, international coordination by governments, increased environmental protection by government, to increased assistance to the arts – Labor is presenting government as the driver of society and the solver of society’s problems. Rudd’s initial (unsuccessful) summit and his Cabinet meetings outside Canberra reflect this approach. 

As mentioned above, this is consistent with a new political thesis suggesting that governments are establishing relationships with those it identifies as important groups (“stakeholders”) in society in ways that make it essential for government to be involved in almost any decision-making. In an article in American Spectator for September 2009, Professor Codevilla (International Relations at Boston University) gives as an example an election statement by (now) President Obama that “I’m going to get everybody around a big table where all can express their views and their needs. And I’ll express mine, and that will make sense of them all because I’ll be president”.   

Little wonder that Obama’s “big table” approach has produce anger from many individual Americans who resent being told what to do and what not to do – and who are not included as stakeholders by a Democrat President. Codevilla argues that this approach is not confined to America. 

The reaction to Obama’s “stakeholder” philosophy in America has been a drop in support in polling and increasing difficulty in obtaining approval for legislation despite his Democrat majority. Here Labor’s policies, which like Obama’s include unions as stakeholders, have yet to see any similar reaction in Australia. Whither goest thou Liberal Party?   

Des Moore, a former Deputy Secretary, Treasury, is Director of the Institute for Private Enterprise.

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