Sir Roderick Carnegie, “To Convince Our Children,”
a talk to The Queensland Confederation of Industry,
The Gateway Inn, Brisbane, March 1, 1979.
Published as a pamphlet by Conzinc Riotinto of Australia Limited.
The future is in our hands. We should welcome it, not avoid it. It can be shaped. Let’s start at home.
Can you convince your children of just five facts of life?
One: private enterprise is simply the most efficient and democratic method of production and distribution — with all its faults, the only one that works.
Two: management — and I don’t mean public service bureaucracy — is as challenging and satisfying and worthwhile as the work of the doctor, the scientist, the other professionals.
Three: profit is not our only aim — we are also honourable and socially responsible, condoning neither personal cheating in paying our taxes, nor government cheating on inflation.
Four: individualism is better than socialism of the left or right.
Five: Australians would be better off with less government, less taxes; and with positive national objectives.
If you cannot and I cannot, then we leave for our children a divided society.
Let me start by talking about time and our children.
When must we start? — Now! Our current problems start with the schooling our fellow pupils did not get twenty and thirty years ago. We adults, after all, are just obsolete children!
Irving Kristol, the American economist, said:
The unit of time … is not a year, but a generation. Businessmen who cannot even persuade their children that business is a morally legitimate activity are not going to succeed, on their own, in persuading the world of it. You can only beat an idea with another idea.
This is how we must start — with ideas! The present idea is that promises, by magic, can get one hundred and ten per cent to spend out of one hundred per cent of Gross National Product produced.
Sir Rowland Wright, chairman of ICI, last year asked:
Where are the teachers who are hammering home to their pupils that wealth cannot be spent unless it has been earned? Where have they been for the last 20 years?
This is where we must start — with the help of educators! The mining industry already gets considerable welcome from educators in Queensland in active local programmes to inform teachers and students about mining and its role in this State.
But as a whole, most Australian schools still do very little to tell their students about the benefits of private enterprise. It is a field in which industry and commerce, and groups such as CAI, have a responsibility and a need to act. Let’s start at home. Let’s start with our children.
Why must we start? Because we are way behind.
So, to Fact One. When did each of us last defend private enterprise to the family? When did each of us last point out that it may be occasionally messy and untidy, but that so is the democracy that goes with it, that it is the best and most efficient system there is?
When did we point out that all other systems are worse?
When did we last point out that the alternative to private enterprise is not some brave new world, but queues and artificial shortages and compulsion, scarcity and tyranny; bankruptcy and bureaucracy?
I need to go no further to this audience. But all of us need to go further with our children, and with the community as a whole.
Private enterprise is not secret enterprise. Nor should it be. It should be open to the sunshine. It should be obedient to the law. It should be proud about its achievements. It should be proud about the achievement of profit.
Fact Two: Who is responsible for those achievements? Just to ask that question is to illustrate how little we tell other people about the vital creative role of the manager.
Let us be clear that it is owners and managers who create. It is owners and managers who risk. It is owners and managers who provide the surplus from which our community distributes to the poor and the weak. It is they who create jobs.
Let’s start making the manager important. Not the bureaucrat — there may be admirable control in an organisation without the discipline and challenge of profit, but it is certainly not the kind of management which accepts personal risk to create productivity.
Let us remember Prince Charles, and quote him to our children:
If we want a society which is free from drudgery, able to enjoy health, with time for recreation and cultural activities of all sorts — then engineering and industrial management must be recognised as honourable, respectable and worthwhile occupations.
So Fact Two and Fact One come together — private enterprise must be lived and defended; management in private enterprise is a challenging and worthwhile community job by which we serve the community. When did we last tell that to our children?
None of us are heroes at home, but who has given his children the list of what a manager is? I quote:
It takes neither genius nor heroism, but rather persistence, tough-mindedness, hard work, intelligence, analytical ability and perhaps most important, tolerance and good will.
The very essence of most bureaucracy is to do things to people. The essence of good management is to do things with and for people.
Who in this audience does not have an uncomfortable feeling about the bureaucracy in his own business?
Who in this audience did not read with irritation, not to say indignation, the recent report by Senator Rae’s committee on Commonwealth instrumentalities — proliferating apparently without control, and many of them virtually unknown to the taxpayer.
I want to spend a little more time on Fact Three: the key facets of a manager’s profession — profit and efficiency and honesty.
First, profit: I raised a few eyebrows when I spoke at a dinner in Queensland four years ago, and said profit was not enough.
As that Irish diplomat Conor Cruise O’Brien once said of his own speeches:
My remarks appeared either incomprehensible or outrageous to a number of people who had liked what they heard about me much more than they liked what they were hearing from me.
Of course profit is a motive. It is not the only motive. What I was doing on that occasion, and I do it again, was to draw attention to the concept of stakeholders. I said four years ago, and I believe many more of you will now agree:
Private enterprise, and private enterprise managers, are not yet used to considering the real stakeholders in the enterprise.
The stakeholders are six groups of people:
- the people who work in the enterprise — workers
- the people who manage it — managers
- the people who invest in it — savers
- the people who supply it — suppliers
- the people who buy from it — consumers
- the people who live near it — neighbours
It is no longer sufficient to say that owners, the investors, the shareholders, are the only ones to be considered. There are more stakeholders than just the shareholders.
That is the message we should be taking to our children.
Increasingly, the manager of a productive enterprise has to be a vigorous intervener in public issues when necessary, without being a professional politician; something of a social worker and psychologist, certainly something of an ambassador. Certainly not just a profit-maker or a profit-taker!
Profit, efficiency, honesty: efficiency is not enough.
Efficiency by itself is not a moral virtue. Performance alone is not something we can sell to our children.
Nor is it helpful to take the easy road of name-calling when we are talking about efficiency and performance.
Let us forcefully put the evidence, for union people know it better than we do, that the handout is not a true Australian tradition. Nor is it efficient. Nor is it a solution. We all want better than that.
Let us not blame the Australian workers, but remember what John Uhrig of Simpson Pope wrote last year. I quote it because it deserves to make every private enterprise manager think uncomfortably about his own performance, and how he justifies it to his children.
I have yet to see a case of low productivity in an Australian factory that wasn’t directly caused by management. When it’s well led and provided with modern equipment, the Australian workforce is capable of a performance equal to that in any other country. However, when it is poorly led, has no sense of direction and finds its security under threat, it will also behave negatively.
Do your children see it that way? Do you tell it to them that way?
Profit, efficiency, honesty; it is not enough to be honest oneself. As Irving Kristol says in his latest book, Two Cheers for Capitalism:
A fateful error. Precisely because there is never enough individual moral sensitivity to go round, every profession must protect its good name with a measure of collective self-discipline. And it should be clear that if the business community makes so little effort to discipline itself, then the government will step in and do the disciplining for it. That is the least desirable but the most predictable outcome.
Last century had a moral conception of business as an honourable vocation for honourable men. Profitable to be sure. But profitable because honourable, not vice versa.
Let us be clear about that: honesty is paramount, and not just because a director or manager can very easily go to jail. Not just because we have bad tax laws. An American judge said in Washington recently:
If two hundred years ago the Americans revolted on the principle that taxation without representation was tyranny, today they may again rise in righteous wrath because taxation with representation, but beyond human comprehension, is even worse.
In spite of repeated public enquiry, Canberra has not acted to make the tax laws simple. Good laws must be understandable. But bad law does not excuse positive tax evasion. Private enterprise must be seen to be honest as well as profitable.
We must have good law if we are again to become a healthy community. The time which so many managers are compelled to give to taxation complexities is socially unproductive and wasteful.
It is time the sad reality was recognised — the reality of ordinary Australians working around or away from a tax system which they regard as “crooked”, the reality of cash-in-hand second jobs.
Honesty has another side, too: Tens of thousands of ordinary Australians now understand that their savings have been stolen from them by governments. Tens of thousands now understand, from painful experience, that inflation methodically destroys the stability of money as a store of value.
Honesty: If tax cheating is inexcusable, Government cheating on inflation is also inexcusable.
But we have not yet won the battle, and the battle begins at home.
We are still not selling the evils of inflation strongly enough to our children or to the community. We still have not reached the level of community understanding, and community support, that clearly exists in some European countries about the damage that continued inflation creates throughout every part of society.
Let us not be just honest with ourselves. Let us also, as managers, be honest with the people our system often puts on the other side of the table in short-term confrontation with us — the responsible union official.
Let us admit that many elected union officials are expressing serious long-term worries felt by their members; and let us agree with them that bureaucracies and governments have shown singularly little interest in anything that lies beyond the next election. And we suffer together the results.
Fact Four: All I have said has been on the grounds that we here today share a common philosophy — that of the individual. There is no conflict between individualism and the idea of stakeholders in the enterprise. Rather the reverse. As owners and managers, we remain individually responsible for our actions.
That is not just a question of law. It is a basic concept of philosophy. In religion as in politics as in daily life, it is individualism that is the greatest of human inventions.
It is not a view popular in all societies. It is not a view popular in most of human history. It is a truly revolutionary view on which our democracy depends. Individual risk. Individual responsibility. Individual accountability. Individual duty to speak the truth when it is uncomfortable and unwelcome. Individual discipline. Individual rewards.
Let us come back to that point again and again as we talk to our friends, our families, our enemies. We are not about groups or “group think”. We are not about the bureaucracy of numbers. We are not about the artificiality of titles and labels.
We are about people. Not in mass. Not by number. Not by files. We are about people as individuals.
All I have said is in favour of the discipline of the market, rather than the socialisms of Left or Right. I need not expand on that.
And the next thing we have to convince our children about is that the discipline of the market should also be reflected in our public spending. And, even more directly, in our public bureaucracies — I will not indulge in the generally inaccurate labelling of them as public services, for often they are neither public nor do they provide service. In Australia, too many of them are nationally remote from the problems of the people.
The time has come, not for a pause in growth or a control on growth rates. The time has come to shed some of the Government fat, as private enterprise has to do when faced with bad times.
So, to Fact Five: Australians would be better off with less government, less taxes; with positive national objectives.
One of the most satisfying parts of governing is to identify those areas which will get more. All governments tend to neglect the distasteful task of selecting those areas which are to get less.
Let me be clear. I am not indulging in the easy exercise of “bashing the public service”. There are talented and dedicated people working for the Governments of this country. Some in productive public enterprise conduct public business in a far-sighted and cost-efficient manner. All of them, even in policy departments, could do their jobs better if given clear national goals, and incentives to carry out their administration constructively and efficiently and at steadily reducing cost.
Only governments can deal with international relations, the defence and protection of the community against the threat of disease, the provision of a stable environment for productive enterprise and worthwhile jobs.
But the scope of government action can be expanded or contracted by community wishes expressed at the polls.
Do ordinary Australians want a smaller, more vigorous, less over-protected public sector, and a private sector given stability and freedom to get on with the job of economic growth for all? I believe that is what they voted for, by considerable majorities, in the last two national elections. I hope we will seen begin to see it happen. And Australians are not alone!
President Carter’s recent State of the Union message indicates that in America, and indeed around the world, all kinds of people have increased disillusion with central governments.
Mr Carter’s words deserve repeating:
We have begun for one of the few times in history actually to dismantle a major federal bureaucracy … It is not enough to have created a lot of government programmes. Now we must make the good more effective, improve or weed out those which are wasteful and unnecessary … We need to enact a sunset law so that when government programmes have outlived their value they will automatically be terminated.
That is from a leader who, like our elected leaders in this country, shares the vision of a better future open to all. That is the vision about which we have to convince our children.
Has the tremendous expansion of government throughout the Western democracies, during these past three decades obviously made us a happier and more contented people? On the contrary, there is far more sourness and bitterness in our lives, public and private, than used to be the case. Nevertheless, the response is still too often to demand still more governmental intervention. Is the theory that a larger dose of what should be good for us will cure the illness caused by a smaller dose of what should have been good for us?
The time has come for sunset policies, as Mr Carter said. On taxes. On government. And in particular on big government, which pretends to give while in reality it takes from its citizens.
Let’s get the biggest items of Australian spending into the perspective of the ordinary family. Everyone wants welfare, health, education. How many of us realise how much that spending is per head?
The sobering, almost terrifying fact is that welfare, health and education spending this year will exceed nine hundred dollars for every Australian, man, woman and child.
Or, looked at the other way as income earners, what is the cost for those Australians who have jobs? After all, it is those who pay the piper. That figure is perhaps more alarming — two thousand two hundred dollars for every member of the workforce, just for welfare, health and education. Fifty dollars for each worker each week!
Can any party, can any government claim that current levels of spending have been voted by the electors, that there is a mandate for it? I do not believe so. There is a genuine Australian belief that we should have a safety net under people, that there should not be gross and visible inequalities and injustice. But does the ordinary average Australian worker think he is getting an average two thousand two hundred dollars worth of welfare, health and education for his family? Of course not. Would he happily pay fifty dollars from his weekly wage? Of course not.
Let us be conscious of unemployment. Let us be particularly conscious of teenage unemployment.
But let us refuse to accept either the government handout or the slogan solution.
We have a direct and unavoidable task as managers in private enterprise — to emphasise the vital difference between “same output with less labour”, which is the basic threat to employment, and “more employment with the same labour” which is the real way to get more productivity, real economic growth, and thus more jobs.
We must, as managers in private enterprise, make it clear that there will be new investment, new growth, new jobs if — and only if — more of our productive enterprises become efficient and internationally competitive. That is the way to use abundant Australian talent, skill, energy, resources. Solve the problem, not administer it.
I said in 1975 here in Brisbane. I say again:
Most Australians are recognising they were fooled in the early 70s. They began in a pleasant dream. They have woken into a nightmare which this country has not seen since the 1930s. The high and the hangover come from the same drug — unchecked inflation.
We need a new sense of direction. We need a renewal of the vision which all Australians had in the nineteen-fifties. It is times like these, when a society loses a positive image of its future, when our ideas of reality and of promises lose their power to convince, that our community is most at risk. We must learn to do without the handout mentality.
The time has come for that new national consensus. I said in 1975. I repeat now:
We have an immediate task, to get across the proper and vital role of profits and savings, and to convince all Australians that the deadly, insidious drain of inflation is a drug habit which can and must be kicked. Let’s not fool ourselves; the alternative is compulsion, queues, direction, and less for all Australians.
Australia is listening. Our children are listening. If we make those points, and keep making them, I believe we can hope to see an Australia for our children that is rich, civilised, humane in its concern for the weak, and able to stand as part of an interdependent world.
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