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  • Peter Francis Fenwick

Opportunities for Corruption

Bridget McKenzie

When the Auditor General released a scathing report on the allocation of $100million in sports grants, we all understood that funds had been allocated to advantage sectional political interests.

The problem is not new, and its extent is staggering. Over $6.8billion is provided annually by the government in the form of grants. So many grants. So many opportunities for corruption.

A cynic might think that grants are devised primarily to create a mechanism for local members to ingratiate themselves with their electorate.

What fools we are! Our politicians are using our money to buy our votes.

Whilst moral outrage against Bridget McKenzie may give momentary pleasure to her opponents, and short-lived discomfiture to her colleagues, it does not address the underlying issue. We need to separate the making of laws from their administration.

The following is an extract from The Fragility of Freedom, published in 2014.

The error of distributive justice

For most of the last century, the prevailing view has been that it is a legitimate role of government to redistribute income and wealth; to enrich some people at the expense of others. The principle began innocently enough. In theory, the state takes from the rich and gives to the poor and the disadvantaged. In practice, the benefits are usurped by those with political influence to capture the regulatory process for their own ends.

Once the state is allowed to enrich some groups at the expense of others, it creates the motive for political influence and the mechanism for the illegitimate use of the state for selfish interests. The consequences of this mistake have been dire. A sense of entitlement prevails. Individuals lack responsibility. Power is abused. Civil virtues decline.

The problem of electoral representation

Politicians proclaim that they will govern for all constituents. That never happens. Our democratic system ensures that politicians act in the best interests of themselves, their party, their electorate and the sectional interests that support them. They do this at the expense of the wider group.

We sense that we are being disadvantaged so that the government can fund benefits to others. We ask for our share and the spending spirals out of control. It can happen in small ways. Funding may be made available for a local sporting team`s new facilities, or the city`s opera society. A railway crossing upgrade may receive priority, or a new local road or railway line may be extended. It can happen in large ways. Aggressive wars may be initiated which provide business opportunities for political colleagues and work opportunities in selected electorates. Well-funded sectors may influence policy through lobbying, advertising and bribery. Those in the know may purchase property in advance of government rezoning that dramatically changes its value. Consequently, government spending rises well beyond what people are prepared to pay for in taxation and for the rest the state goes into debt, putting the burden on the next generation.

Following a dramatic fall in expected revenue, the Australian Federal Budget for 2013 was framed in a way to minimize the deficit. And yet …

It was a single line in Wayne Swan's budget papers, but the $2.2 million handout for a new surf clubhouse at Crescent Head on the NSW mid-north coast was the latest in a long line of big victories for Rob Oakeshott.

Four years after the independent won $2.7m of federal money to rebuild the Wauchope-Bonny Hills Surf Lifesaving Club in Port Macquarie, it seems that while the rest of the country is tightening its belt, the only cutbacks in Mr Oakeshott`s electorate of Lyne are those being performed out on the waves. Other surf clubs in the electorate to win federal government funding for redevelopment and equipment acquisition projects in this year's budget were Black Head ($47,500) and Crowdy Head ($50,000). Another $317,500 will be distributed to community clubs and facilities in Lyne, including Taree Motorcycle Club, Tinonee Community Hall, Wingham Scouts and Cundletown Soccer Club.[1]

Politicians must buy favours to fund expensive election campaigns. Jeffrey Sachs in The Price of Civilization describes how US Congressmen are more beholden to their electoral funders than to the ideals of their party. A Democrat who might be in favour of environmental protection will vote against a bill that would impose effluent treatment costs on the petrochemical plant in his electorate. He may be against war but will vote in favour of increased defence spending because of the armaments factory that employs so many of his voters.

Separation of Powers

The solution is not to bemoan declining morals, but to reduce the role of government to its essentials and to separate the creation of laws from their administration. Parliament should create general laws and allocate funds for general purposes, but give the power over particular allocations to separate, independent, professional organisations. Moreover, the latter should be subject to judicial review to ensure that their decisions are competent and unbiased. In this way the problem of ministers overriding expert advice for their own financial or political interests will be avoided. Infrastructure decisions provide a good example. Instead of government making ad hoc project choices for political reasons, it would be better if they decided on the overall level of funds and a professional planning authority decided on which roads to build and when.

Freed from the politics of buying favours, the quality of our politicians` decisions might improve. They might focus on policies for long-term benefits that are general in their application, rather than being confined to benefitting a particular person or group. They might become more statesmanlike.

Parliamentary democracy is a pillar of a free society. However, the benefits are lost when the politicians representing their constituents believe that their role is to win favours for their sectional interest. Simply having a democratic form of government, with elections every three or four years, is of itself insufficient. We need to ensure that political power is dispersed, that there are opportunities for active participation, and that government decisions are transparent and subject to scrutiny.[2] The case of Eddie Obeid illustrates the point:

In August 2013, the Independent Commission Against Corruption, after an historic three-and-a-half-year inquiry into NSW political corruption, recommended criminal charges against former state Labour ministers Ian Macdonald and Eddie Obeid. The ICAC found Mr Macdonald, Mr Obeid and his son, Moses, corruptly agreed to create a mining tenement over the Obeids` farm in the Bylong Valley in 2008. The decision enriched the family by $30 million and potentially more than $100 million.

Mr Obeid, a former NSW mining minister, was a highly influential figure in successive state Labour governments. He was the leader of a powerful sub-faction of the parliamentary Labour Party`s dominant Right faction, the Terrigals, which the ICAC heard had “disproportionate power” over the government, including the selection of premiers and ministers.

ICAC found Eddie and Moses Obeid acted corruptly by entering into an agreement with Mr. Macdonald that the Mount Penny tenement would be created, and they would receive confidential information about the tender for a coal licence.[3]

Once it is accepted that a politician may influence a decision to support his re-election, it is a small step to the corruption of decisions that financially favour his friends. The case of Eddie Obeid and Ian Macdonald is not an aberration; it is what flows from the structures created.

As noted earlier, once you allow the state to enrich some groups at the expense of others, you create the motive for political influence and the mechanism for the illegitimate use of the state for selfish interests.

The principle of the separation of powers is contravened when government ministers have the final say in the application of the laws they have devised. Administration should be by professionals, applying laws that are general, abstract rules that apply equally to all, not by the Minister acting capriciously for political favour. Furthermore, those professionals` decisions should be subject to judicial review to ensure that they are competent and made with integrity.

These are fundamental to ensuring people's rights and error will perpetuate until the systemic problem is addressed.

[1] Stephen Fitzpatrick, Swell’s up as funds flow to Oakeshott, The Australian, 16th May 2013.

[2] Hear Our Voice by Ken Coghill and Paula Wright offers an excellent discussion of these issues.

[3] Michaela Whitbourn, The Australian Financial Review, 1st August 2013

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