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Two Futures: Clare O'Neil and Tim Watts

August 27, 2015

 

It was six o’clock on a winter’s night in Melbourne. I entered the Trades Hall and climbed the stairs. The bluestone steps were worn concave from a million workers trudging there before me. The place was dingy, deliberately so, as though it had not changed since the Depression, conveying a message that the workers were still downtrodden. Halfway up the stairs was a large poster of Gough covered in lipstick kisses. I entered Bella Hall and joined a throng of young middle class professionals sipping champagne and beer, and eating sushi. 

 

 

Clare O’Neil and Tim Watts were launching the book they had written on the future of Australian politics. Both of them had been elected at the 2013 federal election. Clare has Simon Crean’s old seat of Hotham; Tim holds the safe Labor seat of Gellibrand in Melbourne’s west. They are intelligent and passionate young people who have never held positions in the Union movement. Before entering parliament, Clare studied public policy at Harvard and worked for McKinsey. Tim studied at the London School of Economics and has previously worked for Mallesons and Telstra. After two years in parliament, they have written their manifesto for the future of Australia.

 

I found Clare, chatted with her about how she was enjoying her new career, and bought her book which she signed for me. Steve Bracks launched the book, giving away very little of its content; Tim and Clare thanked friends, family and colleagues. I slipped away before the disco began. I had a book to read.

 

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Two Futures looks at current trends culturally, economically and geopolitically and assesses their impact on Australia over the next twenty-five years. Although a joint venture, Clare and Tim take individual responsibility for the separate chapters.

 

Tim discusses the impact on Democracy, and our political expectations, as we experience more choice as consumers:

 

“It’s become common for people to bypass traditional, broad-based institutions of political engagement like the major political parties and to engage with politics in a way that reflects their preferences issue by issue.”

 

“More Australians are following politics online, particularly through social media, but the internet offers a different version of the public sphere. Instead of citizens being presented with a political debate taking place within common frames of reference, citizens can choose to access voices online that discuss only the debates, indeed only the facts, suiting their political predilections.”

 

He concludes that we need improvements to parliamentary question time; the introduction of citizen juries and participatory budgeting; regular democratic renewal conventions; taxation benefits to high quality media outlets and increased funding to the ABC; and an improved education system to “embed digital literacy and knowledge of citizenship.”

 

Personally, I feel that the greater diversity of informed educated opinion leads to the conclusion of the need for subsidiarity. Fewer matters should be decided by a federal government, more at lower levels of organisation – state and municipal government, and by voluntary organisations. Then there can be a greater variety of solutions satisfying a greater variety of opinion. Also, multiple solutions can be tried and the better ones then used elsewhere.

 

Clare expresses her concern for rising levels of inequality in our society – especially how financial inequality is inconsistent with Australian cultural values of fairness and equity. In order to participate in the future world, to earn a good income, citizens are going to need skills which only come from a good education.

 

She suggests more government spending to reduce this inequality, especially for early childhood development to make up for the fact that lower socio-economic parents do not give their children sufficient grounding in words, numbers, and social skills.

 

Tim discusses how the Digital Revolution is disrupting traditional economic activity and potentially exacerbating inequalities in our society. He envisages government facilitating this:

 

“…setting the boundaries for security, privacy and individual control, and in encouraging interactions to take place … Government interventions will be most beneficial if they are designed to be collaborative, not obstructive: if they can enable everyone to be part of the opportunities created…”

 

Whilst promoting government intervention, Tim is acutely aware of the risks of regulation.

 

“Regulation can, and often does deliver important public benefits. …. But sometimes, especially during periods of rapid technological change, it prevents or hinders new, unanticipated things from emerging. This can be in the public interest, but it is more often in the private interests of specific groups with an unhealthy influence over policy-makers or regulators.”

 

I agree. The capture of the social democratic welfare state by sectional interests for their own economic benefit is something I have commented on, at length, elsewhere.

 

Clare discusses the policies required to deal with the consequences of climate change: heat-related deaths; more frequent bushfires; rising sea levels; increased flooding; declining agricultural yields; increased infectious diseases; and the deterioration of natural wonders such as the Great Barrier Reef.  She acknowledges the difficult trade-offs involved in such policy decisions:

 

“How should governments decide how to use their limited resources, so that priorities are not determined by those with the loudest voices or deepest pockets?  Should Australian governments in 2020 be focused on building a desalination plant in rural South Australia, upgrading an airport runway at risk of flooding in Sydney, or publicly acquiring land in inner-western Melbourne to convert to shaded public parks?”    

      

I think Tim and Clare are very wise to be so cautious.  Government may facilitate the use of disruptive technology – mainly by getting out of the way – but it does not have the price mechanism that free markets have to choose between competing alternatives. Hence its decisions will invariably be less optimal and subject to political corruption.

 

Clare identifies that it is our western heritage that has given us the prosperity that we currently enjoy:

 

“Even progressives like us acknowledge that the British gave us a great economic gift: the democratic and legal institutions that provide a platform for Australian prosperity….Smart policy and sound institutions mean that any Australian can start a business and be confident that good ideas and hard work, rather than connections to decision-makers and corrupt government officials, will bring them success. Australians and foreigners alike can be confident that they will not be subject to punitive or arbitrary taxation, or government expropriation of their assets. Money is safe in the bank, contracts will be enforced and employees will be paid what they are due.”

 

Clare is quite insightful on the need to be strategic with regard to government interventions:

 

“Government spending in Australia is 35 per cent of GDP. Where governments put that money inevitably shapes our economy. In some instances, government interventions are direct, such as determining to build submarines bought by our defence forces offshore instead of in Australia. Sometimes they are less direct: how many students we fund each year to study biochemistry, or whether we build a new freeway in Gladstone or Geelong. Every time governments allocate a dollar to one sector over another, or negotiate a trade agreement that will be tougher on one product or another, they pick a winner. Without strategic approach, governments still make strategic decisions. They’re just probably not very good ones.

 

In 2013, the McKinsey Global Institute released a report on Australia’s economic future, ‘Compete to Prosper’. The authors found that almost 70 per cent of industry assistance goes to industries that are in decline, where Australia arguably doesn’t have a comparative advantage. Some of these industries are critical regardless and need ongoing support. But overall, we would benefit from a national debate about how we could reorient these investments towards our strengths – including goods and services that will best position Australia to partner with Asia. Government funding should back the spear-throwers, not the pallbearers.”  

                                                       

No matter how strategic governments try to be, without the price mechanism of the free market, they will be making decisions in the dark and will inevitably misallocate resources – as past experience above shows. On what basis might you decide that some industries are critical regardless? Moreover, inevitably in practice, decisions will be made for political reasons to win the favour of voters in marginal seats. The submarine decision is an example.

 

In Australia, education is seen primarily as the responsibility of government. Clare discusses what needs to be done to prepare our children for a prosperous future.

 

 “If Australia is still to have a high-skill, high-wage economy in 2040, we need to ask ourselves a difficult question. What will Australian students be able to do in a generation that our global competitors – especially our Asian neighbours – won’t be able to do better, faster, cheaper?"

 

There is no shortage of ideas. The question is, where should government focus its effort?  My suggestion is that we should simply free up the system and let schools and teachers choose what to do;  trial many proposals,  measure what works and  allow schools to implement best practice. Michael Hewitson in his book How Will Our Children Learn describes what is possible.

 

Tim assumes that the economic growth of China, India and South-east Asia will continue apace and examines the geopolitical impact of that.  What will it mean to our alliance with the US?  How will we protect our shipping lanes? How will we build diplomatic, cultural and economic relationships with the countries to our north?  He raises the question of what it means to be Australian, from our own and our neighbours point of view. He proposes more spending on defence, building our own navy, diplomats, foreign aid, Asian language and culture education, and so on.

 

Clare and Tim are optimistic about the future. They envisage a world in which:

 

 “Australians in online communities help each other to solve problems and government to improve the way it delivers health, education and human services. Government uses expanded data collection and analysis to develop more responsive and efficient services.” ;

 

and where

 

“Momentum for a number of sensitive reform packages has been built through citizen juries. The path to successful reform has become smoother through the fostering of a more deliberative media environment, anchored by public broadcasters, tax-exempt newspapers focused on serious journalism and a more digitally literate audience".

 

They hope for a more functional democracy:

 

Sticking to an agenda is a lot easier with a functional democracy, and that means some semblance of bipartisanship – or at least an end to the negativity that poisons parliament today. There are lots of things in Two Futures on which we will never reach consensus with MPs from other parties. But there is common ground. Innovation, early-childhood education, international security and the health of our democratic institutions are all areas where we see potential to work across the aisles. For contested areas of policy, maintaining long-term focus means making cogent, thoughtful, persuasive arguments to the Australian people. In this way, we can make some policies bipartisan by default, where no party can win an election from the other side of the debate.”

 

Given their social democratic predilections, it is unsurprising that Clare and Tim see the solution to most problems as being a function of government and that therefore the best solutions will come from good policy. But in every sphere of activity they propose more government spending - building online communities; early childhood development; education; climate change; defense (including building our own navy);diplomacy, foreign aid, more funding for quality media and the ABC; and so on. Every one of these may be worthwhile. But what can be afforded? Economics is about the allocation of scarce resources. Choices must be made.

 

The dominant political doctrine of the twentieth century – the social democratic welfare state – has proved to be financially unsustainable. We have seen this most recently in Greece. But it is present close to the surface in all Western democracies including our own. Everywhere, budget deficits endure for the foreseeable future.

 

How is the government going to reign in the exponentially expanding expenses on education, health and welfare?  How are they going to raise the taxes to pay for all the spending that their citizens demand? Two Futures would have been improved if it had a chapter addressing this issue.

 

Clare O’Neil and Tim Watts are two young politicians with a very bright future. I know we are going to hear a lot more from them.  I look forward to it.

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