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It's time - for governments to actually govern

By Betsy Fysh - posted Tuesday, 27 September 2011

Australia's embrace of free trade was inevitable - it was the way the world was going. And no one would be inclined to argue against the economic reforms adopted during the Hawke, Keating and Howard years in a country where initiative was being to some degree stifled by a tired system.

But the trouble with changing policy settings is our tendency to over-correct. It's as if we are all over one side of the boat making it lean dangerously and in an attempt to right things we all rush over to the other side, with similar consequences. In addition, it is hard to separate free trade from the wider system in which it is an integral part - the whole free market economics package.

One of the main problems with free market economics is that instead of an economic system it became a full-blown ideology, with all the false promises of utopia, which radical ideologies from Marxism to fascism hold out.

In the case of free market economics, it has had the very unfortunate consequence that governments have failed to actually govern, relying too heavily on the now famous 'invisible hand' of the market place - a term borrowed from a narrow interpretation of the writings of Adam Smith's The Wealth of Nations.

Governments have busied themselves instead with the considerable job of opening up their countries to free trade, removing restrictions on global commercial opportunities and privatizing government-owned assets. The belief was that any pain felt in the short-term would be compensated for, well and truly, by the prosperity to come. And we can't deny that there have been some gains from these 'reforms.'

However, there have also been considerable losses. Some international corporations have become so big and powerful that governments find it hard to create and implement policy which is seen as not to their advantage. If conditions for trade don't suit them in one country, they can simply move some or all of their operations offshore. This causes job losses – they are an electoral poison and the greatest fear of all governments.


We even have the bizarre situation where corporations are seen as "too big to fail" and have to be bailed out by governments, as happened in the global financial crisis in the US. Regrettably, for the US, this meant converting corporate debt into government debt.

The planning and provision of public infrastructure has suffered as governments have scrambled to balance their budgets - one eye always on the bottom line. This has created a sort of myopia where no one thinks very far ahead.

Governments, previously accused with some justification, of waste, have sought to act like businesses themselves except that they have been the domain of a plethora of 'managers,' accountable at the end of each day for the said bottom line. This is in fact contrary to the accepted wisdom of business, where it is often necessary to sacrifice some of today's profit to build for tomorrow's future. This idea does not seem to have influenced the opinions of proponents of free market economics.

Universities have similarly been pressured to adopt this incomplete business model and again, some of the changes have been beneficial. Making universities responsible to a greater degree of their own financing and the alignment of universities with business skills development would seem to be a sensible approach. But as the distinguished Canadian writer and thinker, John Ralston Saul, argued in his Massey Lectures in 1995, it has been at the expense of the central role of higher education - to teach thought.

According to Saul, a student who graduates with mechanistic skills and none of the habits of thought has not been educated, and will have difficulty playing his role as the responsible citizen of a democracy. The simple pursuit of narrow self-interest by everyone will not produce the magical balance in society that the free-marketeers suggest.

Governments fear being seen as "too prescriptive" or "trying to pick winners" and consequently now fail to articulate a vision for their countries and where they might position themselves for the future, given their strengths and weaknesses. The quest for "a level-playing field" has seen the great majority of trade restrictions and industry assistance removed, ironically creating some very unequal playing fields.

This is because of course no policy acts in a vacuum - in Australia or in any other country for that matter. This fact seems to have largely escaped the free market ideologues, at least in Australia, which embraced free trade with great enthusiasm.

With a sort of 'one size fits all' mentality, they failed to take into account the fact that Australia is geographically isolated; it is a very large land mass with the population concentrated along its coastline and its interior very thinly populated; its most disadvantaged people live in that remote interior where there are also vast reserves of minerals; its domestic market is small; it is a significant food and fibre producer (with the majority of farms family owned and operated) with generally clean, green and disease-free products; but it is also very drought-prone; it is moreover a very young country, at least in terms of white settlement so it is still as far as infrastructure goes, a 'developing' country.

Each of these attributes and how they interact needs to be considered by governments when making policy, because of their affect on the final result. The fact that they weren't has created some significant problems for us, not least which has been the lack of infrastructure provision, a problem that is now widely recognized. This has greatly exacerbated the difficulties of Australia's demographic of a largely unpopulated interior.

Similarly, with the lack of service provision we now have a situation where there are numerous opportunities for jobs within mining companies, which have what they call a 'skills shortage,' but nobody wants to go there because of the lack of services and infrastructure. One wonders what would have happened in remote Australia if the fringe benefits tax and the "fly in, fly out" response to it had never happened, but that is all another story.

Or, even if instead of the much debated mining tax, we did what I believe Canada does and require mining companies to spend a certain percentage of their profits in the actual area in which they mine - imagine the infrastructure that could have been built.

It is a similar story with much of regional Australia. Without a certain level of both corporate and government service provision and some government assistance for industry, regional towns have felt the full force of the vagaries of climate and fluctuating world commodity markets and many have simply died. The younger population has fled to the coast. Now rural industry can't find sufficient employees and can't compete with mining companies' wages.


Again, one can only wonder what might have been the case if, for instance, a creative solution had been tried where family farms were assisted by favourable interest rates to buy their next door neighbours out. At least half the rural population would have remained, with bigger, more secure businesses to support the service towns and labour force.

The so called "information super highway" was once touted as a possible saviour of regional populations. There is evidence that in remote parts of Europe and the UK, data processing opportunities and other computer work was the means of attracting back people to those areas. I remember being on a government committee that did considerable work on this with the help of the Queensland University of Technology. But the idea was killed because it was going to increase the number of government jobs available to rural women (by computers) and the union was, allegedly, afraid of public service jobs going outside Brisbane!

There is another issue simmering away in regional Australia now - that is the proliferation of gas wells and coalmines on prime farming land in NSW and Queensland. It threatens to, in some cases, render the land unusable for farming and the potential impact of the fracking process to extract coal seam gas on precious underground water, seems imperfectly understood. Governments must decide between two competing land uses - is it to be the short-term but royalty revenue-rich mining operations (think state governments' bottom lines) or are we to look further ahead to the little discussed but vital question of food security?

And this is not to mention the erosion of Australia's manufacturing base. Granted there was 'over protection' of some industries, which could not be sustained, and we can't compete with China and other Asian countries in terms of costs, but do we really want an Australia that doesn't manufacture anything?

This demonstrates the need for governments to actually govern. And to make any changes to trade and industry policy, they will first need to articulate a vision for Australia and where it wants to be in the future, given its strengths and its weaknesses. Governments will need to consider these areas and take a holistic view. They have a well-educated and resourced public service at their disposal to assist with this. But, with a poll-driven political culture and the governments' increasing tendency to become hostage to special interest groups, it will be very difficult to get right. God save us from another Summit.

If, on the other hand, governments still want to pursue what John Ralston Saul calls the "flight from reality" and rely passively on "the invisible hand" of the market, then I guess we can just become Asia's quarry.

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About the Author

Betsy Fysh is a graduate in politics from the University of Queensland. She was active in rural politics during her time in western Queensland, founding the Regional Women's Alliance. Now retired to a small farm near Brisbane, she continues to write and is currently working on a Masters Degree.

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