Productivity, ideology and constitutional change

| November 13, 2017

The Productivity Commission, in response to Malcolm Turnbull’s request to conduct a wide-ranging review of productivity in Australia, has produced the first of its planned 5 yearly reports.

The Commission’s role, “expressed most simply, is to help governments make better policies, in the long-term interest of the Australian community” and the Commission’s independence is underpinned by an Act of Parliament. The scope of its inquiry is indeed extensive, and it is certainly timely as relative productivity in recent years has gradually declined in Australia.

The brief was to analyse Australia’s productivity performance in both the market and non-market sectors. A “package of initiatives” is presented in order to “shift the dial”, as is claimed. Regrettably, this commentary will suggest that many of the recommendations don’t go far enough. Meliorism and piecemeal type remedies dominate the advice. These won’t “JOLT” Australia out of the mediocre trajectory of its recent history.

At the outset, we are informed that of all relevant policy actors “the level of States and Territories has the greatest responsibility”. Is Australia now asked to turn the clock back? Hard to believe after the failure of the Reform the Federation Inquiry launched by Tony Abbott in 2014, and at least two earlier such futile inquiries. If any structure is preventing Australia to move forward it is the federal structure itself.

One would have expected a blue print for abandoning federalism, given the massive improvements in transport and communications since 1901. The cost of federation is very high indeed, not just in dollar terms but also in slow decision-making. If the “the dividend described as multifactor productivity has fallen away since 2002” – as claimed by the Commission – then could this have something to do with the rising cost of federation?

While “26 years of no recession”, a steadying economic factor, and the growth of modern technology are of course important factors in productivity growth, so is the decline in strike activity and the impact of economic bargaining in workplaces from 1991 onwards. Amazingly, recommendations to adopt the logical extension of Enterprise Bargaining, are still missing in this Review. Although a “willingness to consider novel reforms” is encouraged in Step 2 of the Report this clearly does not include workplace democracy. One has to ask, why not?

I commented on that in my submission to the Productivity Commission Inquiry in 2013 when I presented to them the case for Workplace Democracy, European style – as thoroughly researched at UNSW in 2011. That research convincingly demonstrated workplace democracy’s positive effect on productivity growth. Indeed, the evidence for that is world-wide but it seems to mean nothing to Australians who are still stuck in the adversarial industrial relations culture – just as they are stuck in the adversarial political culture of the country’s two-party system, as demonstrated on an almost daily basis.

Productivity in the political sphere would be greatly enhanced by the introduction of proportional representation and the party list, used in 86 countries in the world – and New Zealand! Productivity would also be enhanced by opening up Parliaments to competent outsiders for Ministerial positions, as is the practice in most European countries, and in the United States.

The overall tenor of this Review is that, in line with OECD thinking, the growing inequality in Australia and many Western countries is to be countered by generating policies that benefit the lower income cohorts. Economic rationalism has gone too far and is having a negative effect on productivity. Therefore, we see extensive recommendations here for better quality and delivery of health services, various adjustments to education and learning systems such as quality checks, especially for privatised education systems (VET), and superior checks on quality in tertiary education.

Some recommendations in this regard are quite questionable, including “to bring universities under consumer law”, as if it is a product! Clearly, tertiary education has been commercialized and is now driven more by business managers than senior academics and academic boards. Yes, teaching has to be valued much more and, in my view the “on line” method of teaching has sadly detracted from the importance of teacher/student contact. HECS was the start of a detrimental phase that this Associate Professor saw developing back in the 1990s. It has damaged all universities in Australia and needs to be turned back.

We could start with what the new New Zealand government has done: No student fees for the first year. Serious consideration should also be given to the re-introduction of Colleges of Advanced Education, not suggested in the Review. This provided for a category of students doing higher professional education without a major research orientation.

There is an important section on cities and towns. The recommendations emphasise better functioning; and that certainly makes sense in a place like Sydney, much less so in several others. However, what is missing here is a recommendation for decentralizing Australia’s population with steps to encourage people to move away from the big metropoles instead of making them ever larger and often more complex – and more of a security risk as well!

This huge country has so much space to offer, even concentrating on the coast lines alone. What measures would be required, in terms of incentives, for people to move to smaller cities or country areas. Why is this issue not raised at all?

We don’t need to hear why cities grow bigger and what has been done to facilitate that in a productive manner. We need to hear how the continued urbanisation of Australia can be countered as it limits productivity nationally. That requires government intervention and encouragement. This cannot be left to the market, although once in train the market will follow.

Having lived 21 years in Lismore I have participated in the remarkable growth of the Northern Rivers area and the part that Southern Cross University played in this expansion. Those who favour Federation usually do so because they think that a unitary government structure tends to centralisation. However the centralisation that has become a problem in Australia is happening at the state level. Indeed most states in the world have a unitary structure and many are better decentralised than Australia!