Victorian Political News		www.robertclark.net

 
The new wave of reform

(From the closing address by Robert Clark, MP to the 1999 Annual Conference of the Australian Liberal Students Federation.)

9 July, 1999

Thank you for the invitation to officially close the 1999 ALSF conference.

An exciting era ahead

ALSF has always been at the forefront of intellectual debate within the Liberal cause in Australia, and in closing this year’s conference I want to step back from day-to-day issues to look at some longer term intellectual developments.

Around the world, we are now entering upon a period which in terms of public policy debate is the most exciting since the 1970’s.

The 1970’s reform wave

The late 1960’s and early 1970’s were not a pleasant time to live in. People rushed to conform with the requirement to be non-conformist. Clothes were daggy and colour schemes were garish. It was the era of stagflation, of hijackings and terrorism, of the oil crisis, the failure of Keynesianism, the timidity of traditional institutions, and the rampages of the left around the world.

Then all of a sudden people started to say that enough was enough. People wanted freedom. They wanted markets to work. They wanted to get governments and restrictions off their backs. They wanted to stop the printing of money that was causing inflation and wrecking economies. They wanted an end to inefficiency, bureaucracy and monopoly providers.

There was a sea change in society. Internationally, we saw the election of Margaret Thatcher and Ronald Reagan. We saw privatisation and market liberalisation around the world. In New Zealand there was Roger Douglas. In Australia, we saw the beginnings of reform under the Fraser government, and then somewhat ironically we saw reform taken up by the Hawke and Keating governments.

Reaping the fruits of reform

Since its beginnings in the 1970’s, the move around the world for free market and anti-totalitarian reform has of course had sweeping success, leading in 1989 to the collapse of most communist regimes.

In Australia, we are now reaping the fruits of reform in abundance. We are enjoying prosperity unprecedented since the 50’s and 60’s, due largely to three factors deriving from the 1970’s moves for reform.

The first factor is microeconomic reform – taking off under the Hawke government with capital market and banking deregulation, then continuing under the Keating Government with the Hilmer inquiry, and taken up in varying degrees by State Governments of all political persuasions. In Victoria, we have seen privatisation of our energy utilities and various other Government-owned businesses. We have seen review and removal of restrictions on various professions and commercial activities, and we have seen the greater involvement of the private sector in providing public services through contracting out and franchising. Nationally, we have seen privatisations under both Labor and Coalition governments.

The second factor has been a restoration of fiscal discipline within governments. First the various States got their budgets in line, and then the Federal Government under John Howard and Peter Costello. This has reduced inflation, slowed down bracket creep and other tax increases, and removed the spectre of public debt hanging over businesses and individuals alike, thereby providing greater certainty for the future and restoring confidence. Furthermore, dramatically reduced government borrowings have eliminated an enormous drain on our capital markets, contributing to the low interest rates prevailing at present, which of course benefit the productive sectors of the economy.

The third factor has been labour market reform. Despite the compromises that had to be made with the Australian Democrats, the Reith reforms have been a significant step for the better. Perhaps even more importantly, there has been a massive change in attitudes towards work, extending even to union officials. In most sectors, people have come to realise that the days of the rigidly specified, inflexible job are over, and that there can be win-win results for employees and employers through working together to get the job done in the best possible way.

I should for completeness mention that there has been a fourth factor contributing to today’s economic prosperity, not connected (at least not directly) with the 1970’s moves for reform. That factor has been the rapid productivity growth arising from information technology advances.

A new reform wave

Given that in Australia, the United States, the UK and many other parts of the world, the reforms originating in the 1970’s have continued to prove so successful, and that the intellectual and political challenges to them have been largely beaten back, why then do I say that we are currently embarking on the most intellectually exciting era since 1970’s?

The reason is that I believe another wave of debate, and hopefully reform, is massing which has the potential to be as far reaching as that which began in the 1970’s.

That does not mean, of course, that we are about experience a replay of the 1970’s. History repeats itself, but seldom exactly. The various elements occur in different permutations and combinations each time.

Unlike the 1970’s, we are not now facing a status quo that is seen to be old, tired and non-performing. Instead, as I have said, we have buoyant economic times, and we also have the excitement of stupendous technological change.

Factors triggering debate

Today it is other factors that are triggering, and are likely to continue to trigger, fresh intellectual and community debate. Some of these factors are negative, others positive.

On the negative side, we have the inevitable risk of backsliding and reform exhaustion, which can afflict even good reforms. The old warriors retire. There may not be new ones to take their place. The next generation may not be battle hardened through confronting opposition. They may not have the vision, the understanding, the passion, of the original reformers. There is the risk of losing sight of what brought the gains in the first place. Modern generations are not alone in this. The Israelites in the wilderness managed time and time again to forget even God once He had rescued them, until the next time they fell on hard times.

So there is a risk now that if we start reintroducing special protections or exemptions, start allowing bureaucracy to grow and multiply, start spending beyond our means, or allow taxation to resume an upward creep, we will soon find that our present good times are not an inalienable right.

It is thus going to become of growing importance for a fresh generation to defend the essential correctness of the reforms of the last 20 years or so.

Secondly, despite the overall benefits that have been achieved for the community, we have growing pockets of people who are suffering badly. We have rising levels of youth suicide, drugs, child abuse, family breakdown, and depression.

Our opponents try to blame this on the very pro-market reforms we are talking about. However, I dispute that – the evidence is against such a correlation, and my strong prima facie assumption is that social problems have primarily social causes.

Nonetheless, if we are to lay claim to having a political philosophy which society should steer by, we need to be able to offer at least explanations of these factors, and preferably remedies for them.

Thirdly, there is a sense of unease in some parts of the community. People complain about feeling lost and powerless. In part this may be due to an irrational pessimism about the likely outcomes of change. However, I would suggest that in part it is due to a loss of a sense of community. We risk being "all global and no local" – of losing our sense of "home". As has been recently pointed out, a secure base at home is important to allow people to take on adventure and challenges in the wider world. [Oliver Letwin MP, The Spectator, 19 June 1999]

Fourthly, the old ways of entrenched privilege and protection, and of social engineering, manipulation and coercion of their fellow humans by committees, boards and governments, are not extinct. They have simply been driven back into their citadels of the media and academia, whence they pour forth bile on what has been achieved in recent years, and try to build a constituency out of those disadvantaged or uncertain about the future. Both Kim Beazley’s Labor and Pauline Hanson’s One Nation are seeking to appeal to that same constituency.

New thinking in Australia and internationally

On the positive side, many thinking members of the left have accepted the value of free market almost unequivocally. Lindsay Tanner’s "Open Australia" embraces globalisation. Mark Latham supports the market, and seeks to build social institutions around it. There is hope that these intelligent younger members of the left will throw over the troglodytes of their side, so that we can at least engage in a rational, productive, debate rather than the carping negativity that has characterised political debate in Australia for so long.

Internationally, there is now a growing volume of exciting theoretical work involving a synthesis of economic and social theory – putting a social context back into economics. This work looks at questions such as why free enterprise, or other social and economic mechanisms and institutions, are more successful in some places than in others, and what can be done to strengthen them.

Just as names such as Milton Friedman and the Chicago school were synonymous with the reform movement of the 1970’s, so names such as Robert Putnam, Francis Fukuyama and Michael Novak are likely to become synonymous with the intellectual developments now taking place around the world. These authors are not all of the one school of thought, but they are all working on a similar range of issues, and they are coming up with many similar answers.

As some of you may know, Robert Putnam was the researcher who demonstrated the close link between the effectiveness of various regional governments in Italy and the participation of their citizens in community affairs. As he put it in one famous quote:

You tell me how many choral societies there are in an Italian region, and I will tell you plus or minus three days how long it will take you to get your health bills reimbursed by its regional government.

Francis Fukuyama has shown that the social mores that exist in a community - the established and largely unwritten habits of personal interaction - are vital for the success of free enterprise. His leading example is trust. If people can’t trust each other, free enterprise won’t work well, nor will other aspects of society. The level of trust in a society is determined by a whole range of factors extrinsic to traditional economics, which Fukuyama has explored in detail. Fukuyama argues that people are by nature social creatures whose basic drives and instincts lead them to make rules for communities. These rules are not necessarily, and often not best, imposed from above, but rather are often worked out through the voluntary interactions of individuals.

Both Francis Fukuyama and Michael Novak argue that liberal democracy and markets go hand in hand, and are logically grounded in fundamental human nature. Michael Novak goes on to argue that liberal democracy and free markets are a progression of the Judeo-Christian tradition dating back over hundreds of years, and that the attempts of the so-called enlightenment and the socialists to create an invented and artificial social structure has been simply an aberration from that tradition.

The challenge to take up the agenda

One of the interesting features of this new wave of discussion and debate is that it cuts across traditional political lines. The communitarians, the US Democrats, and Tony Blair’s New Labour can all lay claim to some of the antecedents to it.

In a sense, that is not a bad thing – we do not want division for division’s sake, and if we and our traditional opponents can agree on something, that is great. We can then move on to issues that remain in dispute.

However, what this does mean that there is a "first mover" advantage. If these are developments on which both we and the more enlightened left can draw, we should make sure we do so first.

We are fully entitled to do so – much of this recent thinking rediscovers and re-states in the language of today principles that are part of the Liberal heritage laid down by Sir Robert Menzies and others.

Thus the challenge to us is to grasp and take full advantage of the new agenda.

We need to draw on these developments to refute those of the old left who want to take us back to the 1970s. We also need to use them to build on and carry forward what has been achieved since the 1970s. We need to make sure they are regarded, as they properly should be, as an extension of the free market reforms that have brought the world so much benefit, so that we can end up with both strong community values and a strong and thriving market. If we don’t size the initiative ourselves, there is a risk that the left will take hold of the agenda and we will end up with a caged and fettered continental European version of market democracy.

So you can see why I say that we are at present living in some of the most exciting times since the 1970s. We are at an intellectual cross-roads. We can take a road back to the bad old ways. We can take a road to a tame and dull world in which the market and civil society exist only within the confines permitted by bureaucracy. Or we can go forward to a world in which people are able to realise both their full economic potential and their full social potential.

As always, ALSF has the opportunity to be at the forefront of the intellectual debates of the time, and I hope you will seize that opportunity. I wish you every success for the future as I now formally close this 1999 Annual Conference.