Thank you to the Sir Robert Menzies Lecture Trust for your kind invitation to deliver this year’s lecture. I wish to acknowledge the indigenous peoples of the fair city of Melbourne, and thank you all for your interest this evening.
I want also to commend Sir Robert Menzies’ party, the Liberal Party of Australia, for their courage in supporting indigenous candidates into the Federal Parliament. Yours is the only major party to have supported an indigenous person in the upper house, the late Senator Neville Bonner from Queensland. I well remember when Senator Bonner visited my hometown in Cape York when I was a young boy, and what a great inspiration he was to our people. The Liberal Party has again made history in its support for our first indigenous member of the lower house, the Member for Hasluck in Western Australia, Ken Wyatt. Might I say how proud I am of his election, and I say to the Liberal Party you have in Ken Wyatt a very fine representative of your party and our people.
Last week Mal Brough, the former Minister for Indigenous Affairs in the Howard Government, who was responsible for introducing Commonwealth legislation to give effect to the Northern Territory intervention and to the Cape York Welfare Reform trial in 2007, told The Australian newspaper that the intervention was “just another failed program” because the Labor government had only maintained the intervention for political reasons. In essence Brough is saying that Labor’s heart was not in it, and without it the aims of the intervention have not been realised.
I have no doubt Brough is correct. Had he remained Minister he would have taken full responsibility to make the implementation work. From my experience of Brough, whilst he was a determined leader, he was amenable to advice – and deeply committed. Whatever people might have thought about the political motivations behind the intervention, for Brough it was always Aboriginal suffering that was uppermost.
Having said that, I think Jenny Macklin is equally committed – and her extension of the income management reform principle to the wider Australian community is testament to her commitment. She has been steadfast in her support for our reforms in Cape York, which she extended when she supported our primary schools reform plan.
Brough and Macklin both erred in a fundamental respect in relation to the Northern Territory whereas they were correct in their support for our endeavours in Cape York over these past three years.
Commonwealth legislation underpinning the Northern Territory intervention and Cape York Welfare Reform was passed at the same time in mid-2007. Whilst the reform objectives were similar there were fundamental differences.
The first difference is that in Cape York the reform agenda was the initiative of Aboriginal leaders, and the policy proposals came from the Cape York Institute – not from government. The Northern Territory policy was unilaterally decided by government.
A second difference was that in Cape York the reform agenda is being implemented in large part by Aboriginal leaders and organisations. State and Commonwealth governments work in partnership with our organisations, whereas in the Northern Territory it is almost exclusively a government run show.
As a result a third difference is that in Cape York there is no great presence of the large national NGOs that routinely deliver social programs – that dominate the Northern Territory scene. I am highly sceptical of these NGOs because they themselves have shown little demonstration that they have moved much beyond the passive welfare paradigm. And their other problem is that, as recipients of Commonwealth Government service delivery contracts, they have no long-term commitment to the people and the places that are at issue here. They have no roots in these troubled communities, and they have no long-term stake or responsibility for their futures. We have been better off without them in Cape York.
A fourth difference is that in Cape York income management occurs only in cases where welfare recipients have failed to fulfil their conditions for receiving income support. Where welfare recipients fail to send their children to school, or fail to look after their children and abide by their housing tenancy obligations and the law, a group of local elders appointed to the Family Responsibilities Commission established under complementary Queensland legislation is empowered to place irresponsible adults under income management orders. The Family Responsibilities Commission has the discretion to decide what proportion of income is managed and for what duration. The difference from the Northern Territory is that the Cape York scheme encourages community members to take up their responsibilities. If people are being responsible, they are not affected by income management.
Income management in the Northern Territory has delivered undeniable benefits to the Aboriginal people concerned. The objections of the anti-intervention left and the sillier sections of the liberal left are nonsense. When you see the increased expenditures in the community stores, you see the most basic benefit from income management: food, clothing and bedding. For too many people living in privileged circumstances money for such basic necessities as food and clothing seems mundane, but for the hungry and cold they are crucial.
The design flaw in the income management scheme in the Northern Territory was ill-advised: it detracted from its credibility and undermined its obvious benefits. Brough should have devised a streamlined version of the Cape York approach, so that responsible people were commended for taking responsibility.
Whatever the design and implementation problems with the Northern Territory intervention, the fundamental mistake made by both the Coalition and Labor is that the intervention was heavily premised on governmental leadership and delivery. An Aboriginal reform leadership and active involvement in delivery was imperative but this didn’t happen. Aboriginal reform organisations needed to be identified or encouraged to form, with clear incentives to pursue reforms, but they weren’t.
The parlous experience of the ATSIC era had blinded too many in Parliament and in the bureaucracy to the fact that Aboriginal reform organisations and leadership cannot be dispensed with. You can’t do it without the natives and their organisations. You can’t contract leadership out to external NGOs and government employees. There must be ownership and responsibility in Aboriginal hands.
Otherwise we breach the meaning of what John Howard channelling Eleanor Roosevelt said when he told us in Cape York in 2004: “There is nothing the government can do for you that you are unwilling to do for yourselves.”
Jenny Macklin should consider Mal Brough’s conclusion last weekend. She was ill-served by the review she appointed following the election of the Rudd Government. Macklin has been hobbled by the perception that she is merely sustaining someone else’s convictions. She should go back to the drawing board and devise her own refreshed policy framework. I would think people like Alison Anderson, Galarrwuy Yunupingu and Marion Scrymgour need to be convinced of and own the policy.
I have no doubt Mal Brough would have adjusted his policies as impediments and unintended consequences arose. That such a dynamic undertaking would requires sails to be trimmed and tacking according the gales and the swell was obvious. This did not happen and instead the great Leviathan of the Commonwealth bureaucracy has dictated the course of events.
Aboriginal policy will never prosper if the Leviathan is not restrained in its cage, and self-determining humans seeking a better life are once again free to roam the continent. In tonight’s lecture I want to outline our reform agenda in Cape York Peninsula and make the argument that both sides of the Australian political divide – Liberal Conservative and Labor – too much believe in the agency of government. There is a strange bipartisanship when it comes to conceiving government’s role in social policy that is harmful. It is high time for Sir Robert Menzies’ heirs in the Liberal Party to get clearer about the role that government should best perform in securing social progress.
Before we could work out our policy response to passive welfare, it was first necessary to come to a view about how individual and social progress actually occurs. We looked to philosophy and development practice across the world. We asked ourselves ‘how does the world work?’ and ‘how do peoples rise up and succeed in the world?’ We came up with a model for how progress works in a more or less liberal capitalist world.
Our aim is inspired by the Nobel Laureate in Economics, Amartya Sen: we are seeking for our people to “have the capabilities to choose lives they have reason to value”.
Our model for progress in Cape York is the staircase. There are three aspects to our staircase.
First, the stairs are built on a foundation of social norms. For us these foundations constitute the social and cultural norms of a community, a group, people, family or society. Norms that mandate personal and social responsibilities to one’s family and to one’s community. Wherever peoples possess strong norms, they are well prepared for advancement.
Second, there are structures underpinning the stairs. For us these support structures constituted the investment in capabilities provided by society to its people. What the Nobel Laureate in Economics Amartya Sen called capabilities include investments in health, education, infrastructure and other economic and political opportunities and freedoms.
Third, incentives and their rational alignment shape the stairs that individuals need to climb. The market sets the prices on each rung going upwards. Our model highlighted a simple point that had long been obscured in traditional social democratic thinking on social justice: each rung on the stairs must be climbed by individual human beings. The stairs are narrow and only allow individuals clutching their children to their breasts to ascend two by two. There is no mass elevator for entire communities.
Our metaphor enabled us to see where social provisioning and communal values are relevant, and where individual self-interest is.
The foundations of social and cultural norms strongly correspond with conservatism: we came to appreciate that peoples were well served if their cultures mandated mutual responsibilities and mutual respect. If cultures obliged their members to fulfil their responsibilities for the care for their children, and the formative development of their youth, they stood them in good stead for advancement. Indeed our policy thinking around these foundations found a strong resonance in conservative thought.
The support structure of capabilities underpinning the stairs strongly correspond with opportunity thinking. It is about social investment in people’s capabilities: health, education and so on. Social investment is critical. Our policy thinking around these support structures found strong resonance in social democratic thought.
The stairs and their rational alignment and the fact that they were ascended by real, individual human beings climbing in pursuit of their own interests corresponded with liberal thinking. We understood the power of choice, rational incentives and that the ultimate engine of development and progress is the self-interest of individuals on behalf of their families.
We came to Adam Smith via our staircase metaphor: the most powerful engine at the centre of development is the self-interest of individuals seeking a better life for themselves.
Our practical work at the coalface has highlighted that the fundamental difference between socialists and liberals centres on planning.
Socialists believe that the (Welfare) State can ‘plan’ development. The liberals oppose the socialists on this point on a number of grounds, the principal being that it denies freedom to individuals to choose their own destinies. And the ‘social engineering’ of the socialists results in perverse distortions of incentives. And the real engine of development (self-interest and freedom of choice within free markets) is lost to the socialist method. For the socialists, the engine of development is externally mandated bureaucratic dictation and management.
On this question we lean on the side of Friedrich von Hayek and the liberals.
Socialism is capable of development – if one is prepared to tolerate high levels of State dictation and low levels of personal freedom. The socialist State can martial the strong forces of the state and considerable resources in the cause of development – but the human cost of freedom is high. And ultimately unsustainable.
And then there are all of the unintended consequences of the best-laid plans.
However powerful bureaucratic management and State dictation can be, self-interest and the freedom to choose within free markets is more powerful for development. If there is anything that the collapse of the communism tells us, it is this.
Now, given that we accept the argument of the liberals in relation to this, then one of the confronting questions of our Welfare Reform agenda is the extent to which it is predicated on planning and social engineering. This is a question that I have kept in mind all of the time.
The first aspect which liberals would be concerned with is the extent to which our welfare conditions and the Family Responsibilities Commission takes away individual responsibility. I answered this potential argument in my essay in Andrew Robb’s Policy Forum. I argued that the effect of passive welfare and the collapse of social norms made it necessary for society to mandate personal responsibility. In particular some basic personal responsibilities. The mandating of personal responsibility is justifiable in our agenda because, as soon as individuals assume their responsibilities they are free to make their own choices. It would not be necessary to mandate personal responsibility if our people lived in a real economy: it is only passive welfare that corrodes (and excuses an abdication of) personal responsibility in this way.
The second aspect of our agenda which liberals may question are our measures aimed at tackling the problems caused by the ‘welfare pedestal’. Imagine that at the foot of our staircase that is a step that is higher than the first rung on the stairs. The price on this stair is higher than the starting price on the real staircase: this is what we call the ‘welfare pedestal’. The welfare pedestal is a trap because to abandon it in order to enter the real economy the individual is often faced with the calculation that it is better to remain on welfare.
In seeking to realign incentives at the bottom end of the staircase, we could be accused of artificial social engineering. But the answer to this potential criticism is that the prices prevailing at the pedestal are themselves artificial. Passive welfare itself is the product of social engineering. Whereas the prices on the staircase of the real economy are established by the market, the ‘prices’ at the bottom end of the stairs have been set by the Welfare State. The problem of the pedestal arises because the government prices are out of line with the market prices. Our measures aimed at tackling the problems of the pedestal are modest, and we don’t have fundamental solutions to them – but our measures do represent an artificial attempt to make the prices at the bottom of the staircase such that they prompt individuals to get off the pedestal and on to the stairs of the real economy. The measures are artificial but they are in response to an artificially created problem.
Having justified our measures, we must nevertheless be careful: there is no guarantee that they will not have unintended consequences. Any artificial manipulation of prices is risky.
We are charting new territory. We are trying to implement a policy aimed at tackling a problem – caused by passive welfare and passive service delivery and occasioned by the intervention of government machinery – in partnership with that very machinery, using many of the methods and means of that very machinery. That this is a source of great misgiving to us is evidenced by the difficulties we have had in explaining to government people what we mean by “passive service delivery” and in getting common ground with them that it is a problem, that needs to be avoided. We only have partial recognition of the problem and no real confidence that the government people “get it”.
Government people are planners in the socialist sense. This is the reason why government programs have failed and have caused our passive welfare problems.
Of course market liberals also make plans. They do planning in business and so on. But they understand, more than socialists, that planning is just a tool. They are not slaves to the plan and they understand the limits of rationalist planning. They know that what is more important than the power of the planner is the power of the actor who, motivated by self-interest and able to choose in a free market, will actually make change.
I think individuals fall on one side of a line in the middle of a spectrum. If you imagine a spectrum with ultra-libertarians on the right and the 5-year plan socialists on the left, then individuals fall on one or other side of that line – depending upon their background and basic philosophical disposition.
It is true that since the 1980s government bureaucracies have adopted business management concepts, so increasingly they fall closer to the centre – but no matter these adaptations, they are still fundamentally statist planners.
People whose background is business know that planning and the mechanisms of management are just tools. They end up on the liberal side of the spectrum.
It is a generalisation that is basically true that people from government fall on one side of this spectrum and people from business fall on the other.
Our reform agenda is premised on liberal thinking about the real limits of planning – so we are at odds with the preferred orientation of government bureaucrats.
Those whose predominant conception is that Aboriginal policy is about the better coordination of government and non-government service delivery are off target.
I would say that an overwhelming proportion – let me say 75 per cent – of government investment in social programs that are aimed at providing “services” to address social problems, are off target. They do not produce change, and indeed by giving the appearance that “something is being done” in response to certain problems, they prevent leaders and governments from taking dealing with the root drivers of these problems.
That there is also an entrenched industry around this myriad of useless programs was the reason the late American politician and intellectual, Daniel Patrick Moynihan called these services as “feeding the sparrows by feeding the horses.”
Services are secondary enablers. A small percentage of them are necessary, but they need to be properly targeted and rigorously interrogated before they are sponsored. The question asked of them is whether they displace responsibilities that should be properly undertaken by individuals, families or communities. There is a role for government intervention, but all interventions must be premised upon the reinstatement of responsibility to those who in the long run ultimately should carry responsibility. Yes, social breakdown and crises require emergency interventions and support – but the problem with disadvantaged Australians is that the Welfare State has set up camp in the very households, and crowded the natural responsibilities of parents and families.
The problem with the great preponderance of Australian social support programs is that the primary drivers – the intangible engines of human motivation and the tangible human enablers who help to mobilise that motivation – are missing.
When I read policy statements these primary drivers are not mentioned at all or are highly obscured. Self-interest is structurally thwarted in indigenous communities that are dominated by programs.
The absence of free markets in key areas of individual aspiration and endeavour (for example, training and employment opportunities, housing and enterprise) means that individuals are constrained in their ability to choose and to ‘vote with their feet’ and ‘take with their own hands’. These desired goods are only obtainable through public, community distribution channels which subject people to the daunting internecine politics of the public community. Those who succeed at politics succeed, those who cannot, miss out. Unable to vote with one’s own feet to secure opportunity, individuals who are defeated by this system are struck with what I once called a ‘structural apathy’. A pall of what the French call ennui afflicts these communities: people who are resigned to not pursuing their interests in the public realm.
But it is not that self-interest is absent. Unable to be pursued within free and impartial markets, self-interest is pursued in the public domain by those willing to play the stressful game of internecine politics – nepotism and petty organisation centred corruption is usually the result of self-interest in the public domain.
For the majority who are daunted by the prospect of realising self-interest in the public domain, then self-interest is pursued within the kinship and demand sharing network of the community’s culture. So cultural reciprocity and generosity turns into humbugging, bludging and ruthless manipulation, exploitation and plain theft and fraud within and between families. Stealing your disabled relative’s key card or conning a ‘loan’ out of a neighbour – these are weekly episodes of self-interest being pursued at the most miserable level.
The dominance of the public sphere and the stunted private sphere in the communities reflect the limited individual freedom in these places. Reform is about growing the private sphere and pushing back the public sphere.
We must keep in mind Sen’s point: in order for individuals to have real choice, they must have the capabilities to choose.
As well as tackling the structural barriers to individual choice, the challenge for reform is this: how do we mobilise self-interest where it is dormant and stunted? Self-interest can be externally constrained by structural barriers, as well as internally inhibited by a lack of confidence, inexperience, fear, lack of ambition and limited outlooks: the absence of hope.
Our reform agenda in Cape York is based in the belief in the possibility of all individuals. We say that Every Child Is Special and Each and Every One of Us Can Do It.
Our reform work is about recognising and mobilising the passions, talents and preferences of individuals. This is what the great English social entrepreneur, Lord Andrew Mawson said when he came out to Australia in 2000:
My experience of people in the East End of London is that we all have passions of one kind or another. Some of them might be a bit dodgy, but actually we have got them and you have actually got to start where people’s passions are. We began to back people, not structures.
This is how the Nobel Laureate, Muhammad Yunus, Founder of the Grameen Bank puts it:
I can tell you very emphatically that in terms of human capability there is no difference between a poor person and a very privileged person. All human beings are packed with unlimited potential. Poor people are no exception to this rule. But the world around them never gave them the opportunity to know that each of them is carrying a wonderful gift in them. The gift remains unknown. Our challenge is to help the poor unwrap their gift.
The pursuit of self-interest by individuals produces a social result. In at least two ways. Firstly, strong and functional families are a product of self-interest. Individuals have a great and jealous interest in their own families: and this interest produces a good social result.
Secondly, the sum total of having functional and strong families that are the product of individuals within these families pursuing their self-interest is this: you have a strong and functional community – a great social result. Self-interest does not just produce good for the individual or her family, it produces a social good.
This point is important. Many people assume that self-interest only produces private gain.
Humans are not just motivated by self-interest: they have interests and a sense of duty and belonging outside of their families and with a wider community. This sense of community and people’s desire to belong to a community is another intangible engine of human motivation.
In the broader community people participate and contribute via the voluntary principle. They heed JFK’s clarion call: “Ask not what your community can do for you, but what you can do for your community!”
The extent to which people contribute to their community and the relative health of their community depends on its fund of social capital. Trust is the currency of the social capital fund. The more trust, the more social capital.
Welfare reform, social inclusion or development?
When we began our reform thinking in Cape York Peninsula ten years ago, we were in part inspired by the reforms implemented in the United States under President Clinton when Congress enacted the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) in 1996. Conditionality in welfare and strong work obligation requirements seemed to us to be the obvious lessons from the United States experience.
We also looked to Prime Minister Tony Blair’s less conclusive attempts in the United Kingdom where they seemed to get the rhetoric right but there was little concrete reform. In Australia the New Labour concept of Social Inclusion attracted the attention of Julia Gillard, and upon the Labor Party gaining government in 2007 she established a Social Inclusion Board pursuant to her obvious enthusiasm for the British concept.
After 10 years of looking to North America and Britain for reform inspiration, I came to the conclusion that there is a country from whom we have more to learn than either of those traditional sources of policy foment, in our own region. And that country is Singapore.
The problem with Australian policy makers and leaders looking to the United States and Britain for solutions to problems of poverty and development of the large and growing numbers of disadvantaged peoples in these societies is that there is little evidence of success. The PROWRA reforms did succeed in a narrow sense – but it cannot be said that the United States is a paragon of poverty elimination and widespread uplift of the lowest classes. The same thing with Britain.
Why are we looking to Britain and the United States for policy solutions when they are struggling with the same problems without making much of a fist of them?
Yet when you look at the story of Singapore under the leadership of former Prime Minister Lee Kwan Yew since 1965, you see a society whose success in achieving the broad-based uplift of their people, is unparalleled. Income levels and the levels of home and apartment ownership in Singapore speak of a broad-based uplift of people out of the Third World and into the First.
Yes it is probably hard to think of a less analogous situation to that of remote and undeveloped Cape York Peninsula than that of the modern city state of Singapore peopled by an enterprising population of overseas Chinese, Indians and Malays – exploiting the special blessings of their geography – but I contend that the policy lessons are absolutely germane.
Before I identify what I think those policy lessons to be, let me first set out a brief outline of the Singapore story, and the distinct path they took from that taken by the developed nations.
In his fascinating Memoirs Lee Kwan Yew says that he and his fellow leaders aimed to create for their country “a fair society, not a welfare society”. Lee Kwan Yew recognised from the beginning that the form of welfare provisioning which the advanced western nations were implementing would produce problems, and his country explicitly pursued a different philosophy and a different path.
Watching the ever-increasing costs of the welfare state in Britain and Sweden, we decided to avoid this debilitating system. We noted by the 1970s that when governments undertook primary responsibility for the basic duties of the head of a family, the drive in people weakened. Welfare undermined self-reliance. People did not have to work for their families’ wellbeing. The handout became a way of life. The downward spiral was relentless as motivation and productivity went down. People lost the drive to achieve because they paid too much in taxes. They became dependent on the state for their basic needs.
The great difference between the Singaporean approach and that of the welfare states of the western world was, as Lee Kwan Yew writes: “We chose to redistribute wealth by asset enhancement, not by subsidies for consumption.”
There is in fact a great deal of redistribution in Singapore: it is just that redistribution is strictly aimed at the asset and wealth development capabilities of its citizens.
Central to the entire approach is the compulsory savings system of the country’s Central Provident Fund. The leaders of Singapore built around the CPF an array of individual and family solutions for home and apartment ownership, retirement funds and healthcare co-payment insurance funds. They mandated family-based solutions to welfare whilst subsidizing those things that enhanced the earning and asset accumulation capacities of individuals.
By mandating a universal approach to compulsory savings and home ownership, Singapore’s policies included everyone in the society. The denizens of the shanties were not left to their own devices. They too were both obliged and supported into apartment ownership. Lee Kwan Yew writes of the transition phase when families used to living in shanties first moved into apartments, how they took their ducks and chooks with them. Singapore did not lock a certain group in their society out of the development pathway: they developed the support structures to allow for a broad-based mobility to take place.
The following lessons can be drawn from what is sometimes called a Confucian approach to development:
They upheld the primacy of individual and family self-interest to climb to a better life. (Lee Kwan Yew wrote: “I work on the basis that all men and women first work for themselves and their families, and only then will they share a portion of it with the less fortunate.”)
They established strong support parameters to support individuals and families to climb (They add to our staircase metaphor a strictly defined set of railings inside which they expect their citizens to climb)
They aimed to put everyone on the development path – and don’t allow an underclass to develop
They redistributed to promote wealth and asset development, not consumption
They maintained a paternalistic approach to social order and responsibility
Australia has three ways to think about the ongoing and growing problems of poverty and the growth of a disadvantaged underclass. There is the Welfare Reform paradigm inspired by the United States. There is the Social Inclusion paradigm inspired by Britain. And then there is a development paradigm inspired by Singapore.
Whilst reform in Australia will incorporate elements of the North American and British approaches, I believe we should see the problems facing disadvantaged families and communities in First World nations such as ours as a development challenge. And we should learn the lessons from those who have succeeded with development.
From Welfare State to Opportunity Society
Liberals have a problem in defending the advantages of a liberal economy and a liberal labour market because what is missing is a narrative about fairness and disadvantage. “How do we deal with the outsiders?” as Arthur Sinodinos once put it to me.
It is time to think about our country moving from a Welfare State to an Opportunity Society.
Poverty is really a four-sided problem: the necessity of an income, education for one’s children, health care for family members and shelter for the family, a home.
The problem is that the late Welfare State has come to respond to poverty as an endlessly facetted problem. A vast panoply of secondary programmes have been developed to respond to primary failures. Australia needs to move the focus back to fixing primary problems, namely the bread-and-butter issues of family functioning: income, health, education and housing. If disadvantaged families can live in safe and ordered neighbourhoods and have the four corners of their primary needs secured (income, education, health and home) then they have the old working-class uplift formula back together again: they have all that is needed to go from log cabin to white house.
The Australian Opportunity Society must guarantee solutions or government support for solutions to these four basic needs.
By combining a dynamic, job-creating liberal labour market with a guaranteed social opportunity system that ensures all Australians have solutions around their four basic needs (income, education, health and housing) we will be able to say that Australians need not live in poverty. There is no need for poverty in Australia. Bob Hawke made the unrealisable commitment that no child would live in poverty et cetera. It was unrealistic for two reasons. Firstly, government can never guarantee such an outcome, because personal responsibility is necessary and this is something that government can mandate, but can never guarantee. Secondly, the then prevalent social policies involved large passive welfare programs, that did not address those primary determinants of poverty: income, education, health and home.
We can make a more credible claim: that Australians need not live in poverty because our society’s new social contract will guarantee opportunity. Rather than the old guarantee of merely providing a passive safety net, the new social contract will guarantee opportunity. Opportunity so that families can put their lives back together and then take advantage of the tremendous opportunities of a liberal economy, including the benefits of more job creation.
The equation should be: guaranteed social opportunity from the government