Economics.org.au

Apology from Economics.org.au
The publication of Bert Kelly’s 1980 series of articles on feather beds was disrupted by an industrial dispute in May and June 1980, resulting in delays and the final three items in the series failing to appear in the Financial Review. Because the column was also published in rural newspapers we are able to reconstruct the series. We apologise that this has taken over 30 years, but as Bert Kelly wrote in the first article: “[O]ccupants of feather beds … are not usually in a hurry. … [They] are unlikely to rush off … as I plod painfully after them.”

Bert Kelly on feather beds (1980)
1. How many does it take to crowd a feather bed? (AFR, June 6)
2. Once on a feather bed, what to do next? (AFR, June 13)
3. Feather beds are comfortable if the mob is kept off them (AFR, June 20)
4. Conference lines take to plush waterbeds (AFR, June 27)
5. Shipping feather bed attracts a large crew (AFR, July 4)
6. Feather beds take to the air (Stock and Land, June 19)
7. Consumers find feather beds a bit hard! (Stock and Land, June 26)
8. Yes … the Wheat Board has a feather bed, too! (Stock and Land, July 3)

Bert Kelly articles referencing the above series (or, with #9, #12, and #15-16, part of a two- or three-parter that does)
9. Enough to drive you to drink (The Bulletin, March 24, 1981)
10. The feather bed becomes crowded (The Bulletin, March 31, 1981) [This was republished in Kelly’s Economics Made Easy (Adelaide: Brolga Books, 1982), pp. 198-200, as “Feather Beds,” where it was followed by the three-part Charabanc series I digitised a few years ago.]
11. Transports of delay (The Bulletin, April 14, 1981) Excerpt: “Last year, I wrote seven articles about feather beds …” As you see above, I count eight (not seven) consecutive columns in the 1980 Bert Kelly feather bed series.
12. Feather beds too friendly (The Bulletin, April 21, 1981)
13. Time to stir some sleeping giants (The Bulletin, July 14, 1981)
14. Taking Canberra for a ride (The Bulletin, November 9, 1982)
15. Running to water on wages (The Bulletin, August 23, 1983)
16. Centralising confrontation (The Bulletin, August 30, 1983)
17. Shaking up the feather bed (The Bulletin, September 6, 1983)
18. Knocking the stuffing out of feather beds (The Australian, July 8, 1985)
19. How a sweet cop turned an industry sour (The Australian, Feb 25, 1986)
20. The feather bed on rails sure runs against the grain (The Australian, June 30, 1986)

1.
Bert Kelly, “How many does it take to crowd a feather bed?,”
The Australian Financial Review, June 6, 1980, p. 7.

The feather beds that I wish to discuss over the next few weeks are the particular advantages given by the Government to particular people or firms, so making things comfortable for the people on the beds.

We have many such feather beds, some float (shipping conferences), some fly (two airline policies) and some drive on roads (Canberra taxis).

There are quotas for clothing and cars to look at and we may even get around to some of the producer marketing boards.

This will take some time but there is no panic. There is one quality common to most occupants of feather beds and that is they are not usually in a hurry.

That is what feather beds are for, being indolent on, so their occupants are unlikely to rush off into the undergrowth as I plod painfully after them.

In the first two articles, I will spell out some of the qualities that are common to most feather beds and their occupants.

One of these is that all feather beds have someone lying comfortably on them.

When I mentioned this surprising fact to Mavis, she snapped back that she could not remember what else feather beds were for. I did not answer her back.

However, though the occupant of the feather bed may be seen to be lying back to somnolent comfort, you will find that he (or they) will be awake in a flash if there is any suggestion that other people might be about to join them there.

Feather beds are only comfortable if not crowded.

It is certainly not a case of “the more we are together, the happier will we be.” All feather bed occupants take an active and urgent interest in keeping other people out.

The second aspect of feather beds is not so well known.

They offer a powerful temptation to rough and rude rivals who, if they see a feather bed gliding by with some of their competitors on it, they know that life will be comfortable there if only they can get aboard.

So, if they are strong and cunning enough, they will, at the expense of a bit of their own skin, and their competitors’ also, often be able to clamber aboard.

This may mean that one or more of the others may be squeezed out of the other side. Feather beds are only comfortable if not crowded.

One of the advantages of being retired is that I have both the time and the inclination to listen to the reminiscences of Sir Thomas Playford.

On one occasion, Sir Tom was in America trying to induce more industry to come to South Australia. There was almost certainly an element of political or poetic licence in his description of how he found himself in the boardroom of Uniroyal, the giant American tyre company, but at last he got an appointment with the president of the company Mr X.

But Sir Tom found it hard to keep the great man’s attention. He kept forgetting Sir Tom’s name and where he was from.

However, once Sir Tom starts to chew an ear, he does not easily let go, as indeed I know.

Eventually, Mr X took evasive action by calling in one of his henchmen and asked him to find out if Uniroyal had any intentions of setting up a tyre factory in a place called South Australia. The man came back with a file and confirmed that the company had no interest at all in founding a factory in such an out-of-the-way place.

Mr X then said to Sir Tom, “There you are, Mr Samford, I knew we would not be interested. Sorry, but I am rather busy. Good afternoon.”

Then Sir Tom says that he said, “You have been very kind, sir, and I thought that you would not be interested because there are other tyre companies in Australia and they operate under the tightly controlled cartel that keep prices high and other people out. (That was before we had our restrictive trade practice legislation.) So I can understand that you would feel diffident about tangling with them.”

Mr X, who was halfway to the door, swung around.

“Is the ring tight enough to be tough?” he asked Sir Tom.

On being assured that it was Mr X said to his offsider, “On your way back from Hong Kong, you must call in and see Mr Ramford, and this place of his. If there is indeed a good strong feather bed there, I would rather like to be on it. And I don’t think that they will keep Uniroyal out.”

So that’s how Uniroyal came to Australia and incidentally gave us some of the over-capacity that made the very high duties necessary. And as the duties were lowered, the feather bed became too crowded and Goodrich had to get out the other side.

The moral of the story is that, if feather beds become really comfortable, they become attractive enough to tempt people like Mr Murdoch to clamber aboard.

They then take up so much room that people like Sir Reggie have to get out the other side. Feather beds are not comfortable if crowded.

***
2.
Bert Kelly, “Once on a feather bed, what to do next?,” The Australian Financial Review, June 13, 1980, p. 9.

Last week we discussed two aspects of feather beds and the behaviour of their occupants.

The first was that feather beds are only comfortable if not crowded and the second, if the beds get too comfortable, they become very attractive to rough and rude competitors who sometimes elbow their way on board.

This happened with Uniroyal and Ansett and it is always likely.

There are other attributes common to feather beds and their occupants.

One is that they usually receive the loyalty of the people who service them.

Now I have to choose my words with great care when I talk about the services rendered to people on feather beds.

The city slickers among you will not understand my problem but I can illustrate it best by telling this story.

Years ago, Mavis and I were travelling in a ship along the coast of W.A. As we were getting dressed in the cabin one morning I asked Mavis which day it was.

She replied that it was Sunday. “I wonder if the captain is having a service this morning?” I asked.

Mavis, being a country girl, snapped back, “It doesn’t matter about his private life as long as he is driving the ship.”

So when I talk about the people and groups who service the occupants of feather beds, I hasten to assure you that everything is conducted in a most proper way.

For instance, the Australian Shippers Council became necessary to counter the power of the shipping conferences.

The regulation of taxi numbers in Canberra has necessitated a staff of civil servants to do the regulating.

Keeping the two-airline policy on an even keel necessitates, or it used to anyway, the back-up of a large number of dedicated civil servants in the Transport Department.

So for the best of reasons, the feather bed occupants are cared for by a large number of people who have a vested interest in the continuation of the feather bed in their area.

They would not admit that it was self-interest that made them so attached to them but I guess that there is more of this than they know. And in many cases, most of the expertise in an industry is either in the bed, or in those who service the bed, so it is often unusually difficult to dismantle it or even pinch a few feathers out of the mattress.

And frequently the people adversely affected by the particular advantages given to the people on the bed are spread thinly through the community so their influence is not as direct and so not as politically powerful as the more concentrated group who benefit from the privileged position they have obtained.

The inbuilt bias of government departments towards the feather beds they serve is frequently transferred across to their political masters.

Frequently a minister stands guard over his department’s organisation like a cow over its calf. Wal Fife did it with the Narcotics Bureau. Peter Nixon did it with his two-airline policy when he was the Minister for Transport.

I would be surprised if he does not regard it with a more jaundiced eye now that it belongs to another minister. And ministers are usually busy and harassed people, so I can well understand how a minister must be tempted to let his feather bed coast quietly along and how he must hate some sod who starts to rock it.

There is then an understandable tendency for politicians and civil servants to let sleeping dogs lie if they are allowed to do this on feather beds.

However, besides these worthy and dedicated supporters who serve the feather beds, there are other groups who stand guard over them, whose motives are not so pure.

For instance, I guess the Painters and Dockers Union would fiercely defend the privileged position granted the Australian National Line under the Navigation Act. The ANL cow might be more difficult to milk if she wasn’t on her feather bed. (I seem to have got my metaphors a bit mixed!) And I suppose that Waterside Workers would do the same.

I am sure that the same kind of thinking influences the owners of quotas to import clothing and footwear.

In past years, these people used to fight valiantly to import more of the goods they were selling. But now that they have been given a licence to import a limited amount of goods that has been denied to their competitors, they happily go along with the system.

Their previous opposition has been purchased at the price of keeping their competitors out of their feather bed.

That is enough about the general attitudes of feather bed occupants and those that serve them for good reasons and bad. I hope that we will be able to have a quick look at the Canberra taxi feather bed next week.

***
3.
Bert Kelly, “Feather beds are comfortable if the mob is kept off them,” The Australian Financial Review, June 20, 1980, p. 13.

My interest in feather beds had been stimulated by a pamphlet written by Dr Peter Swan, of the ANU in Canberra.

It is called On Buying a Job and describes what happened when the number of taxi licences in Canberra was held artificially low, so presenting a fine feather bed to those who were fortunate enough to have a taxi licence.

The pamphlet was published by the Centre of Independent Studies (CIS) in Sydney. This is a group of enthusiastic people determined to hold high the free enterprise banner.

They do not content themselves with eloquence as do the other groups who claim a similar ideal — they are more interested in action. They have modelled themselves on the Institute of Economic Affairs in Britain which has encouraged the publication of well researched papers which exploded so many socialist myths.

If the CIS can maintain this standard, free enterprise will indeed be well served.

Taxi numbers are held down in Canberra by Government regulation.

There are now 104 taxis or 4.7 per 10,000 people in Canberra. In Queanbeyan, a few miles away, there are 7.1 taxis per 10,000 people.

Because the taxi numbers are held low, a Canberra taxi plate is worth about $38,500 while a Queanbeyan plate is worth about $28,000.

The bigger the Government induced scarcity, the greater the value of a licence.

So the taxi owners with licences are dedicated to the continuation of the system, as are the lucky owners of car and clothing quotas.

Feather beds are only comfortable if most of the mob are kept off them.

It may be claimed that, because Canberra has a Commonwealth car pool, it needs less taxis than other places. But the car pool is not used for ordinary taxi tasks or so they claim.

And I know that MPs were frequently carried in taxis late at night so it could be said that, because Canberra taxis get this extra work, more taxis and not less are needed there.

In any case, if Canberra taxis are not kept artificially low in numbers, why are its plates the most expensive in Australia?

It is interesting that, in London, where there is no restriction on taxi numbers but a very tight control on quality of service and vehicles, there are about 12.5 taxis per 10,000 people.

This disposes of the argument that it is necessary to restrict taxi numbers to maintain standards. This could be done by any authority that had the power and the guts.

In Canberra, taxi licences were allocated by ballot and they were eagerly sought after because they did not cost anything and were worth a lot of money.

But now they are allocated on the basis of seniority.

If a taxi driver (not an owner) has been driving for many years, he knows that he must be getting towards the head of the queue if more licences are to be issued so he is naturally keen to leave the present arrangements undisturbed.

If feather beds are to be properly comfortable, they must not be rocked either.

Swan suggests that one reason why the present system is allowed to continue is that others besides the taxi owners and the regulators have a vested interest in not rocking the feather bed.

The Canberra bus system is subsidised in a most generous manner. Swan says:

On average, every dollar spent on bus fares attracts a subsidy of in excess of $4.35.

One can imagine the outcry if a decision was made to meet the deficit out of local rates instead of it being a burden on all Commonwealth taxpayers as at present.

If Canberra’s travellers were to be confronted with the true cost of the bus system, many more would switch to other modes of transport such as taxis.

We should not be surprised that the bureaucratic hub of Australia, Canberra, should lead the country in bureaucratic intervention in the taxi industry, though this is directly opposite to the Liberal Party’s much vaunted belief in free enterprise.

But the present situation will not be easily altered. Once individuals or small groups get properly embedded in feather beds they take a lot of digging out.

Many of the present taxi plate holders have paid high prices for their plates, they feel that they have paid for a special place in heaven.

And the civil servants who attend to the feather bed by doing the regulating grow to love the feather bed they serve.

And the poor minister is very busy and so he hates having people rock the bed.

So I suppose things will stay as they are, with only the consumer getting clobbered.

But no one worries about him these days.

***
4.
Bert Kelly, “Conference lines take to plush waterbeds,” The Australian Financial Review, June 27, 1980, p. 13.

Last week I wrote about the Canberra taxi feather bed which is a comfortable piece of furniture but tiny compared with the immense feather bed of Australian shipping.

This bed is big enough to have portholes along its side.

Our restrictive trade practice legislation forbids the formation and operation of price-fixing rings in most parts of the economy but an exception is made in the case of shipping, thus enabling shipowners to combine together to fix freight rates and loyalty discounts and so on.

Evidently the Government feels that if shipping timetables are known ahead and freight rates are certain, forward contracts can be made with more certainty.

So shipowners are allowed to come together in shipping conferences, thus allowing the conference feather bed to sail on smoother seas.

I recently attended a symposium devoted to the examination of the question whether we should continue to allow the shipping conferences to occupy this special place in heaven.

The first two speakers represented the shipowners and they made a good case for the present arrangements to continue.

They pointed out that before conference freight rates could be altered, agreement had to be obtained from the Shippers’ Council, the Government assisted organisation of the people who ship goods in conventional vessels from Australia.

For instance, the woolbuyers and meat exporters are typical members of the council.

The shipping conference claim that the negotiations to alter freight rates are very detailed and comprehensive.

The Shippers’ Council is represented by a very competent firm of accountants at these negotiations and we were assured it would be impossible for the shipowners’ wool to be pulled over the Shippers Councils’ eyes.

I regard this claim with some cynicism.

I remember how, when the government used to set out to find and fix the cost of growing wheat, they used to send out to the bush their most competent civil servants and we farmers used to have little meetings with them.

Fred was our chief spokesman because he had cultivated a most convincing kind of sob in his voice which was quite moving.

We didn’t actually tell lies, or not many anyway, but there were an awful lot of things we didn’t tell them.

They were not fools, they knew that they were being done because how else could the continental escalation in this price of wheat growing land be explained, when we were using it to grow wheat at prices lower than the reputed cost of growing wheat?

But I would defy any accountancy firm to pinpoint where they were wrong.

And if poor simple people like Fred and I could do that to very dedicated civil servants, I have no doubt that shipowners, with their immense resources, could do far better.

And I notice that their balance sheets, like the price of wheat land, hardly bear out their sad stories of imminent ruin.

So I take little comfort from the conference argument that increases in freight rates have to be approved by the Shippers’ Council.

After the two conference line defenders had explained, as farmers do, that things were crook and how they were just getting by, we had a paper from Mr Naughton, the Australian agent from the ABC container line of Belgium.

This line is not in any conference and is doing very well outside it.

Indeed, the ABC line reminded me of Mr X, the president of Uniroyal, who was induced to come to Australia when he heard about our tyre cartel which held up the price of tyres.

He evidently thought that it would be a nice feather bed for him also.

ABC does not want to get into the conference bed but it is quite happy for the conference to hold up the freight rates and then it can slip in under the conference necks and skim the cream of the cargo.

There are many reasons why the ABC line is able to underbid the conferences on the best cargo.

It runs modern ships specifically designed for the trade and it runs them slower so using less fuel.

It does not have lavish shore establishments.

And as Mr Naughton said, almost in tears: “They make their agents work very hard.”

The line has been a very good influence in keeping the conferences honest and in forcing some conference freight rates down, so God bless them.

But they are almost an offshoot of the conference system so we are still left with the question: is the Government correct to give the conferences the right to occupy their particular feather bed?

But this will have to wait till next week.

***
5.
Bert Kelly, “Shipping feather bed attracts large crew,” The Australian Financial Review, July 4, 1980, p. 13.

Last week we had a quick look at the occupants of the shipping feather bed. This week we will examine the groups who service it.

Strange as it may seem, the most dedicated supporter of the conference shipping system is the Government.

Indeed, they actually helped construct the bed by giving the shipping conferences exemption from the restrictive trade legislation so they can act in restraint of trade as no other groups can.

So the Government pretty well owns the bed.

Why are they so attached to it?

The first and easy answer is that they also lie on it with the shipowners.

The Australian National Line, when it went into overseas shipping, elected to do so as a member of a shipping conference.

The public reason for this decision was that they would then have a window through which they could get a good look at the somewhat murky conference scene.

They may have hoped then they could reform the conference system from within if reform was needed — if, indeed, it was found that the conferences were pulling the wool over our eyes.

So the Government’s shipping line is on the conference shipping feather bed with the other passengers. This is one reason the Government supports the system.

But there are other reasons.

For instance, the conferences have an unofficial arrangement with many cargoes, which they call the Pan Australian freight rate.

I understand the freight for meat shipped from Wyndham to, say, New York is the same as from Sydney to New York.

Clearly it costs more to lift the Wyndham meat and this would be reflected in their freight rate if these conference arrangements were not made.

But now it is all done by the conferences and I can see how attractive this must be to governments who love a quiet life and who otherwise would have to make public arrangements that are usually hidden away.

There are other groups who service the shipping bed.

One is the Shippers’ Council which I mentioned last week.

But a much more powerful group are the men who work on the waterfront, the wharfies and clerks.

Because the conferences have known they can usually recover increased stevedoring costs by united conference action of increasing freight rates, there has been, in the past, if not now, an alarming tendency for shipowners to give in to unreasonable demands by waterfront workers.

As I have often said, you can always tell a man dining out on an expense account by the enthusiasm with which he summons the waiter.

If shipowners had to pick up the tab for increased handling costs, they would fight more fiercely to contain them.

But this is not necessary when these costs can be so smoothly passed over to the shippers.

Many of us feel this habit of the conferences bowing to union pressure is the greatest handicap the conference system has imposed on us.

But this is never even mentioned when the conferences defend themselves in public.

The result of the Government and the conferences continually backing away from this problem has left us with cargo handling costs that has just about ruined conventional interstate shipping and it may well do the same for conventional overseas shipping.

Another group who could be expected to defend the system with ferocity is the painters and dockers.

They evidently regard it as fair game for almost anything.

It is only a few years since a royal commission spelt out the blackmail tactics by which this union had been extracting large sums from shipowners which were used, not for union purposes, but for feathering the pockets of the union officials.

At present there is another inquiry afoot into far worse goings on.

So we would expect the system to be well supported by the painters and dockers.

Most of my criticisms so far have been about overseas shipping arrangements.

But one of the greatest crosses the Australian economy carries is our Navigation Act that ensures interstate cargo is carried on Australian ships.

So the freight from Sydney to Perth is more than from Sydney to London, going past Perth on the way.

This immense and extravagant feather bed is in the tender care of the Department of Transport.

If ever there was government intervention that should be looked at, it was this.

But this would lead to a considerable disturbance on a large and luxurious feather bed so I presume it will be left undisturbed.

BHP and IAC have spelt out how it is damaging our development but we must not rock the boat.

Once people settle down with the government on a really comfortable feather bed, they take a bit of shifting.

***
6.
Bert Kelly, “Feather beds take to the air,”
Stock and Land, June 19, 1980, p. 13.

Some Government-controlled feather beds run on roads (Canberra taxis), some float (shipping conferences) and some fly.

My political eyes were hardly opened when the two-airline policy was born in 1952, but I have a hazy memory that it was introduced to encourage Ansett to take over Australian National Airways, which was getting weak at the knees.

The Liberal-Country Party government of that time was then, as distinct from now, dedicated to the sacred cause of competition, and it was evidently concerned that, if ANA folded, the airline business would fall into the hands of the government airline, TAA.

The main planks in the policy are that the main airline business, passengers and freight, must be shared between Ansett and TAA and the Government must have the final say in fixing passenger and freight charges.

So the airline industry is now a flying feather bed under the control of the Government.

When the two-airline policy was born, the number of airline passengers carried was 1,727 million, and freight weighed 56,400 tonnes. The corresponding figures for 1979 were 10,789 million passengers and 127,460 tonnes.

The question then is: Is the two-airline policy justified now, as it was in 1952?

In May, the Minister for Transport, Mr Hunt, announced the appointment of a committee to examine the question of domestic air fares. There is concern in some states, particularly in WA, that the Government has fixed its airfares unnecessarily high, so that the airline can collect enough fat to enable them to subsidise the airfares to Tasmania where, say the suspicious Perth people, the Government is always prepared to buy votes at the expense of the rest of Australia.

When we heard that this committee was looming, and it loomed for a long time before it was appointed, we thought that it was going to be asked to examine the two-airline policy to see if it was still the right policy for the changed conditions of 1980.

But when its terms of reference were announced, we were disappointed to find that it was a much narrower enquiry, its main task being to find out if there is any cross subsidisation in the air fare structure and, if there is, what should be done about it.

You may remember that, when the Labor Party was in power and the Khemlani scandal raged, I wrote a series of articles comparing the behaviour of the press sleuth hounds then with the behaviour of our pack of rabbit dogs that we kept before myxo.

If these dogs became suspicious that there was a rabbit in a heap of logs, they would work away for hours, sniffing, yapping excitedly and digging furiously.

But sometimes all that the pack found, right at the end, was a poor little mouse, which the very embarrassed pack tried to pretend that they had been looking for all along.

Many people were hoping that this very high-level committee could have a look at the large and powerful two-airline rabbit to see if it was still suited to our changed circumstances. But no, its terms of reference limit it to catching this little mouse of air far cross subsidisation.

This little animal may indeed by worth catching, but it is not nearly as important as the two-airline rabbit. But perhaps this rabbit has now grown so big that the Government is a bit nervous about tackling it.

I suppose that, once the Government moved in to limit competition to the two airlines, it pretty well had to take the next step and insist on its right to approve air fare and freight charges.

But I guess the Government is about as good at this as it was at fixing the cost of growing wheat; or the Government-backed Australian Shippers’ Council is at fighting the good fight with the shipping conferences.

When the Government, with all its ability and its dedicated civil servants, was holding down the reputed cost of growing wheat, the value of wheat land continued to increase.

The Government, with similar dedicated, has been fixing air fares, but the airline feather bed became so attractive that rougher and ruder competitors were encouraged to elbow their way aboard the bed, so that Sir Reginald had to get out the other side.

***
7.
Bert Kelly, “Consumers find feather beds a bit hard!,” Stock and Land, June 26, 1980, p. 13.

One of the most insidious feather beds is the arrangements made by the Government to allocate quotas to import clothing, footwear and textiles.

A civil servant can give to one importer the right to import a certain amount (a quota) of a particular article while denying the same right to his competitor.

So by a stroke of a bureaucrat’s pen, particular people can be advantaged while others can be damaged, yet there is little public exposure of who is being helped and who is being hurt.

Foolish people have contended goods that came in under quota and which did not attract customs duty could be sold cheaper than goods on which customs duty had to be paid.

They could, indeed, but they aren’t!

The quota holder pushes up his prices to what the market will bear, which is generally alongside the local manufacturers price. He knows that he cannot import any more of those goods, so why should he cut his prices?

And the traditional way of raising prices is to limit supply, and that is exactly what a quota is designed to do.

If the traditional way of protecting Australian industry were used, the goods that came in over the tariff wall would attract customs duty, so at least the general revenue would benefit.

But, under the quota system, the windfall gains are given to the quota holder. He is given, by bureaucratic action, the present of a quota worth a lot of money.

Some quotas have been sold for high prices, yet they cost the quota holder nothing except perhaps some assiduous attention to civil servants in Canberra.

In any other walk of life, if we heard of civil servants handing out gifts to particular people while denying them to others, there would be a public outcry, but no one seems to worry with quotas.

The consumer’s watchdog, AFCO, does what it can, but no one worries about the consumers these days. I would have expected the Council of Civil Liberties to be interested, but it evidently breathes a purer air, and is not concerned with mundane matters.

So the quota feather bed is left undisturbed. In the second article in this feather bed series, I said that feather beds are loved not only by those who lie on them, but also by those that service them.

There are about 50 civil servants servicing the quota feather bed in Canberra, and more are called in at peak times. Then there are the people working for customs agents and many others in importing firms, all busily servicing the bed, and with little public exposure of what is going on.

You would have expected that the big department stores would have been angry about the damage that the quota system was doing to them and their customers.

Some of them indeed do speak up bravely, but others have quotas of their own, and so are naturally anxious to leave the feather bed undisturbed.

Others tell me that they are frightened to speak out, lest their supplies be cut off.

So the whole quota business is a mess, difficult to understand because of its complexity, clouded by the self-interest of some groups and the cowardice of others.

So the wretched feather bed drifts on, greatly benefiting the few people on it, serviced by subservient camp followers, but damaging the economy in general and hurting others in particular.

The quota allocated to an importer usually depends on the amount of a particular good that he imported in the base year.

This may be the fairest way the wretched business can be done, but it builds a frightening rigidity into the system because it inhibits the entry of new blood into the business which is left in the hands of people who were successful in times past.

We had the same problem with wheat quotas years ago. These were allocated on the basis of past production, which meant that the young battler who was clearing new land that might very well be more suitable for wheat growing than old wheat growing land, could not get a quota.

Fortunately, in this case, the wretched wheat quotas did not stay in force long enough to do great permanent damage to the wheat industry, although they grievously hurt many young farmers.

But these quotas for clothing, footwear and textiles have been in operation for years now, with particular people getting particular benefits, while other poor sods who do not know how to operate the system get clobbered.

In other words, those who have their trotters in the trough, are happy and so are those who look after them. But the consumers and a lot of other people get hurt and no one worries about them.

***
8.
Bert Kelly, “Yes … the Wheat Board has a feather bed, too!,” Stock and Land, July 3, 1980, p. 12 and p. 14.

This last of the feather bed articles centres around the position the Government has given the Australian Wheat Board by making it the only organisation allowed to handle the Australian wheat crop.

I guess the Wheat Board members would smile wryly at the thought that, just at the moment, they could be said to be living on a feather bed.

What with the unkind remarks of the Senate committee and the Auditor-General, it may feel its bed to be half full of plough shares. I am not going to kick the poor sods when they are down; everyone else is having a go at them because of their book-keeping aberrations.

Being rather a messer in this regard myself, I am not in a position to throw stones at others.

I mentioned last week that during the period when the wheat quotas were in operation, the quotas were allocated on the basis of a farmer’s past production. This acted as a brake on change, discouraging the young battler on new land from growing wheat, while encouraging the traditional wheat grower to do so. So the quota system encouraged conservatism in wheat farming.

There are other conservative forces working in the industry, aided and abetted by the monopoly position the Government has given the Wheat Board.

For many years, the board adamantly opposed any departure from the old, and discredited “fair average quality” method of classifying wheat.

The FAQ was strongly criticised by industry leaders such as Sutton and Callaghan, because they felt that the new grades would open up new markets.

But the board evidently felt that the new methods would have complicated wheat handling and marketing.

When the new wheat variety, Wren, was bred, it too was discouraged. It is true that it was of poor milling quality, but it was an ideal fodder wheat for the local market.

But it would have complicated the board’s system had it been allowed in. The board’s resistance to the introduction of Wren is an illustration of why it would have been a good thing to have others besides the Wheat Board handling feed wheat for the local market, as the IAC recommended, but which was opposed by the wheat grower organisation with a violent knee-jerk reaction.

There are other conservative forces in operation in the wheat industry which we should watch critically. For instance, most wheat breeding in Australia is under the influence, if not control, of wheat growers. This is done through the various committees in the states and Commonwealth which are made up mostly of farmers, people expert in the industry.

This is not surprising, because wheat growers pay a research levy to encourage research, so why should they not have a large say in how their research money is spent?

However, there are dangers hidden away in doing things this way. For instance, we should ask ourselves why is it that almost no wheat is grown in the Western District of Victoria, on the Naracoorte plain in SA, and in the lower southern district in WA?

Some of this land may not be suitable for wheat because of drainage problems, but I have an uneasy feeling that another reason may be that we have not bred a wheat variety suitable for these districts.

It cannot be that the rainfall in these districts is too high, because English farmers grow tremendous crops on even higher rainfall.

I can understand the tendency for wheat breeding and other wheat research to gravitate towards those areas at present growing wheat, but we should be careful we do not go too far along that road. For instance, the new techniques of growing crops with chemicals and not cultivation is likely to open up new areas for wheat growing.

In the wetter districts, the problem of getting a proper kill of weeds before the soil gets waterlogged is a real one now, but probably such land could be treated with chemicals to kill the weeds, and then the wheat crop sown earlier.

The ability of our present wheat breeding system to breed varieties suitable to the wetter districts is limited by the supply of plant breeders and money.

Perhaps we should have another look at the question of plant breeders’ rights. I know that the wheat grower organisations are against the projected plant breeders’ rights legislation being applied to cereals, but this may be the natural reaction of people on a feather bed who want the present position left undisturbed.

But I understand that in the U.S. and the U.K., the breeding of cereal varieties to suit particular locations is encouraged because private industry groups can be financially rewarded for doing this because of their plant breeders’ legislation.

There is evidently very effective co-operation and competition between the private and public plant breeders. Perhaps we could no more of that kind of think in Australia.

***
9.
Bert Kelly, “Enough to drive you to drink,”
The Bulletin, March 24, 1981, p. 107.

The Opposition spokesman for Industry and Commerce, Chris Hurford, is an adornment to his party and the Federal Parliament. He is very handsome with a noble patrician brow. When he is talking to me I half expect him to throw his toga across his shoulder as the Romans did. He doesn’t have much to say but he says it elegantly and almost all the time.

Hurford is a nice man and he means well. When the draft report of the Industries Assistance Commission (IAC) on passenger cars was made public on February 23, Hurford gave tongue almost immediately.

The Melbourne Age reports him as saying:

The only sensible solution is to introduce better planning to the industry, which will rationalise component production, reduce the number of models, assist companies to invest in more modern equipment and encourage exports.

The market has its uses, but it should not be allowed to cause social distress because of a lack of government action.

That the car industry is in an awful mess is all too plain.

The size of the mess has been again spelt out with commendable clarity by the IAC. We now know that we are subsidising the industry at the rate of $1000 million a year and that the price of an average motor car is increased by about $2000.

So the demand for cars stays low and employment in the industry falls.

On February 26 The Age commented:

When the cost of protecting an industry exceeds the cost of employing everybody in it, from managing directors to production workers, clearly something has gone wrong. This is what has happened in the Australian motor vehicle industry. It now costs the community something in the order of $15,000 a year to keep each of the 65,000 workers in the industry in a job. The hard fact is that Australia could save money if everybody now in the industry was given a pension equal to their present wage and the industry closed down.

This rather startling solution would certainly increase employment.

There are twice as many people servicing cars as there are making them.

If the tariff and quota walls were demolished, so making cars $2000 cheaper, there would be more cars being sold so employment would increase.

How did the industry get into this ripe old mess? First, foolish government action in over-protecting the industry encouraged too many manufacturers to set up here.

We have five manufacturers and three assemblers of cars for a market of under 500,000 cars while the United States has three manufacturers for a market of over 10 million. The throughput of our plants is too small for economic production.

Then, to make matters worse, the government imposed its 85 percent component plan, thus forcing the manufacturers to use expensive Australian components. So the government forced our too numerous manufacturers to wear hobbles which made it quite impossible for them to produce cheap cars. Consequently, employment in the industry tends to fall all the time.

The industry has been in this mess for years and it knows that drastic reconstruction is inevitable and the longer it is delayed, the worse it will be. The union leaders know it, too, when they are thinking and not talking. The bureaucrats who service the industry know it, even the politicians know it.

But every time the industry is about to face up to the trauma of change and prepares to take the nasty but necessary medicine it knows it has to have, a minister, either Federal or State, rushes in and dashes the draught from the patient’s lips and blames the IAC for pointing out just how extremely sick the patient is.

The IAC knows only too well that it is government intervention that it is the cause of the industry’s problems. The IAC says:

In the commission’s view, there has been too much government direction and control of the conduct of the industry through the existing measures.

Government has affected the size and shape of the industry more than almost all others.

It is unlikely that Australia will enjoy a more competitive passenger motor vehicle industry until the government adopts a more hands-off attitude and approach to the industry.

But what would Hurford do? His solution is to give the industry more of the same treatment that made it so sick. He may have a noble patrician brow but I sometimes wonder what there is behind it.

***
10.
Bert Kelly, “The feather bed becomes crowded,”
The Bulletin, March 31, 1981, p. 123.

Last year I wrote a series of articles about the behaviour of people who live on feather beds. First came the Canberra taxi racket, then the feather beds that float (shipping conferences) and those that fly (two-airline agreements). I mentioned how feather beds present a powerful temptation to rough and rude capitalists who, seeing the comfortable condition of the occupants of feather beds, are tempted to fight for a place on one for themselves. Sir Reginal Ansett could bear witness to what happens because, when Sir Peter Abeles and Rupert Murdoch clambered aboard Sir Reggie’s bed, he had to get out the other side!

The feather bed syndrome appears in the Industries Assistance Commission report on the car industry. The industry is in a mess because we have too many car and component manufacturers, so the throughput of our factories is too small for economic production. But why on earth did so many manufacturers set up here? They must have known that our market was too small to support five manufacturers and three assemblers; you didn’t need an economics degree to find that out, the dogs have been barking it for years. They came because both State and Federal governments went on their knees to beg them to come here. The States gave them favoured treatment all along the line, built them spur railway lines and gave them anything else they wanted and proudly proclaimed their willingness to help in every way. And the Federal Government was not backward either and had no hesitation in promising unlimited protection against imports.

Encouraged by this open-handed government treatment, car manufacturers from all over the world hurried here and settled down on their feather bed, costing about $1000 million a year to maintain. It wasn’t very comfortable because there were too many on it for comfort.

But at least it was safe because State and Federal ministers would rush around tucking in anyone who looked as if he were about to be squeezed out.

So the main cause of the industry mess is too much government intervention. But when you read the requests that the industry made to the IAC as to how they thought the industry should be helped in the future, they almost all asked for another handout of government guidance. “Please tell us what to do and we will do it,” they pleaded. “All we want is to be told where our duty lies, but the government must look after us.” Then they gave another rub to their private enterprise halo and sank back, expecting the government to save them from taking the inevitable reconstruction steps it knows it must take one day. And the State governments, particularly in South Australia and Victoria, earnestly urged the Federal Government to give its milk, even if most of it is wasted. After all, it doesn’t cost the States anything and, when things go bad, they can always say that the Feds have been mean with their milk or they can blame it all on the IAC.

The Federal Government is always telling the industry that it must face up to market forces, but as soon as it is about to do so the government intervenes to stop it, claiming that it is doing so to help employment. So the car industry remains in its mess, so car prices remain high and the demand for cars falls and with it employment.

Governments do not behave like this because they are ignorant or stupid. I know more about government than most and from close quarters, too. The reasons why governments make such a mess of most of their commercial decisions is not their fundamental foolishness but because they find it difficult to resist the temptation to seek popularity.

You should always look with a jaundiced eye on any government decision that is popular; it is likely to be wrong.

Lest you think I am allowing my prejudices to influence my logic, let me give a specific example of the way government intervention has mucked up the car industry. In the early 1960s, when the protection needed by the car industry was comparatively low, GM-H had an annual production run of 160,000 EH Holdens so they could produce quite cheaply. Then along came the good old government, dripping its milk of love and affection all over the place, and we now have an average production run of 23,000 units and we have to subsidise the industry at a rate of $1000 million a year with employment falling continually.

The solution of the Opposition spokesman for Industry and Commerce Chris Hurford is to have even more government intervention. Fred says that the government couldn’t run a booze-up in a brewery!

***
11.
Bert Kelly, “Transports of delay,”
The Bulletin, April 14, 1981, p. 108.

There is said to be a special providence that looks after fools, drunken men and sailors. I am uncertain into which category I fall but certainly someone has been looking after me because, towards the end of last year, the Minister for Transport, Ralph Hunt, told me that he had intended to ask me to be a member of the Holcroft Inquiry into domestic air fares. Fortunately, I was in China when he was looking for me so that cup was taken from me.

So when the Holcroft report was made public with all the criticisms about the way the government suddenly terminated the inquiry and the lack of co-operation from the Department of Transport (DOT) and the Bureau of Transport Economics, I realised how lucky I was to be spared all the argument, loving the quiet life as I do.

Last year, I wrote seven articles about feather beds, saying that such beds can be described as the particularly favourable position given by governments to particular people. I said that some feather beds floated (shipping conferences and Nagivation Act arrangements) and some flew (two-airline agreements).

I also pointed out that the occupants of these beds had one common determination and that was to keep others out of their beds which were only comfortable if not crowded. Yet it was this comfort that made them attractive to people passing by.

However, it is not only the occupants of the beds that take a proprietary interest in them — often equally devoted are those who service the beds. I suppose we should think of them as knights of the bedchamber. These are often the only ones who know the peculiar habits and needs of the people on the beds and there is usually a good deal of friendly understanding between the two groups. And those that service the beds have a vested interest in seeing that their feather bed is left undisturbed.

My suspicions about the DOT were first aroused when I found that, when they wanted an examination of the conference shipping system, they appointed the Grigor Committee from their own department. They found that everything in the garden was pretty good. As Dr Trace, of Monash, said in his assessment of the report: “The Grigor report is very much the brainchild of a regulatory, closed, rationalised, conference-minded Department of Transport.”

But this is a mild criticism compared to the slathering DOT received from the Holcroft Inquiry. I cannot help thinking that DOT resented their minister wanting an outside inquiry because they seemed determined that their two lusty children, Ansett and TAA, should not be exposed to a critical examination by outside upstarts. And when a government department decides to delay things by sitting back in the britchen (a backing harness), they really put their arse into it. The inquiry began in May and one would have expected the DOT would have snapped into action. Yet the report said:

As the Department of Transport is the regulatory authority for domestic air fares in Australia we also found it quite unhelpful that its submission was not received until December 10, some two weeks after the government had already moved to curtail the inquiry. This made it impracticable to examine the department in public hearing. Nor was any written submission received from the Bureau of Transport Economics.

The DOT seemed unwilling to give its milk down or perhaps it didn’t have any. The report said:

The inadequacy of information on airline activities in Australia has frustrated analyses of operations and the impact of regulatory policies.

One interpretation of this position, especially in light of the workings of this inquiry, could be that the regulatory (DOT) and the regulated (the airlines) have a mutual interest in minimising public analysis and discuss of their performance.

I have never seen a more complete clobbering than this, but clobberings seem to be the order of the day where the Holcroft Inquiry is concerned. In parliament, the previous Minister for Transport, Peter Nixon, questioned the integrity of the members of the committee his government had appointed.

This kind of bullying behaviour is becoming all too common these days. Fraser and Hamer get stuck into the IAC if it doesn’t tell them what they want to hear, and now Nixon is at it too. Fred says it is because they are Victorians and it has something to do with the way they play football.

All the same, I would have thought that Peter Nixon’s dairy farming background would have taught him that kicking the cow in the udder is not generally the best way to make her give milk down.

***
12.
Bert Kelly, “Feather beds too friendly,”
The Bulletin, April 21, 1981, p. 142.

About once a year my imagination gets away from me and I can’t seem to control myself.

Just now I keep having a kind of a vision of a sacred cow called TAP (short for Two Airline Policy) lying back on her feather bed, reading a paper supplied by the airline and sipping great glasses of free grog.

She is being carefully cared for by a dedicated air hostess called DOT (short for Department of Transport). I know the picture is a bit confused and recent events may change it — but it won’t go away.

It started after I had written last week’s article in which I quoted the bitter comments about DOT in the recently-released Holcroft report about air fares.

You will remember the clobbering the DOT got because they either would not, or could not, supply the information the inquiry wanted in time for it to be used before the inquiry was so suddenly termination.

Then I turned to the back of the Holcroft report and read a very interesting statement by the chairman of the Civil Aeronautics Bosard (CAB) in the US.

This organisation used to regulate civil aviation in America, as the TAP encourages DOT to do in Australia. I was surprised to find that the de-regulation that had begun there in 1978 was thought to have had beneficial results because it had made the airlines leaner and fares lower.

So evidently the backseat driving that the CAB had been doing in the United States had been more of a hindrance than a help, and I couldn’t help wondering whether we were wise to have DOT doing so much backseat driving in Australia.

I admit that this was the first time I had thought like this, because questioning the two airline policy seemed almost the same as questioning motherhood; I had been brought up to treat both as sacred.

Just when I was getting in a proper sweat about this, someone sent me a booklet called Domestic Airline Regulations written by Michael Kirby and published by the Centre for Independent Studies (CIS).

This is the free enterprise group that last year published a pamphlet by Peter Swan called Buying a Job, which exposed the taxi racket in Canberra. We are greatly indebted to the CIS for these two studies and I hope they can continue the good work.

Kirby’s general conclusion is that the TAP has certainly encouraged Ansett and TAA to adopt a self-satisfied, complacent attitude to their problems, knowing as they do that on the main routes they are immune from competition from outsiders. And there is little incentive for one to get too far ahead of the other because, if that happens, the first has to mark time until the other catches up.

Real competition tends to be limited to the design of the hostesses’ uniforms and the quantity and quality of the free grog.

Here the competition is fierce and profligate. For instance, the Ansett decision to supply free grog is said to have cost them $5 million a year. I am not surprised, judging by the way I lap it up when I think I am getting something for nothing.

Some people may think that the TAP is necessary to maintain high safety standards, but this is not so.

Safety standards are quite properly a function of the Department of Transport and are drawn up and enforced irrespective of the TAP. This was done very effectively before the TAP was introduced in 1953.

Certainly the TAP has made TAA and Ansett very attached to their feather bed, which is not surprising, because the TAP prevents other competitors joining them there and the first requirement of a really comfortable feather bed is that it should not be crowded. And it must be an additional attraction for them to have a group as competent and dedicated as DOT looking after them. They say that nursemaids get emotionally attached to their charges, especially if they have been with the family for some years. I have an uneasy feeling that DOT is more interested in the welfare of her children than of the rest of us.

This is always one of the traps of feather beds: the people who service them become much more expert in their particular bed than the laymen is. And often they will try to prevent the layman trying to examine the management of the bed with an inexperienced eye.

After reading the Holcroft report, I find it difficult to treat with proper respect the DOT protestations about the advisability of continuing with the TAP. I now take all their judgments with a tablespoon of salt.

***
13.
Bert Kelly, “Time to stir some sleeping giants,”
The Bulletin, July 14, 1981, p. 115.

Some time ago I wrote about the behaviour of people who have been given comfortable places on feather beds. I took as examples feather beds that go on roads (Canberra taxis), the beds that fly (the two-airline policy) and the beds that float (shipping conferences and Navigation Act arrangements). I said that naturally the occupiers of feather beds take a jaundiced view of rude intruders clambering aboard their beds because these are only really comfortable if not crowded. I also said that the people deputed to care for those on their beds usually become deeply attached to their charges. They also become expert at looking after them, much more expert than members of parliament and even ministers.

The point I want to make now is that feather beds are likely to remain undisturbed unless the minister in charge of the bed demands that his department remakes the bed every now and again, gets the occupier out so that the minister can see how the patient is doing and whether he is strong enough to walk alone. But the nurse is unlikely to do this unless she is made to because, after all, her livelihood may be at risk if the patient is discharged. And, what’s more, she probably thinks that she is the only one who understands the patient. To an unusual degree then, feather beds need the attention of their ministers. So with this in mind, let us take a quick look at how our feather beds are faring.

I was in Canberra recently and not now being a power in the land, I had to hire a taxi. I asked the driver if it was his taxi and he gave a hollow laugh and said, “What do you think I am, a plurry millionaire?” He went on to tell me that taxi plates now cost about $50,000 each compared with about $40,000 when I wrote before. The plates are allocated by the Department of the ACT whose minister is Michael Hodgman who, before he became a minister, used to have a mind of his own.

I wonder what he is doing with it now, allowing his department to create such an artificial shortage which is the only reason for the plates being so valuable.

Here we have a Liberal minister who will give tongue at the drop of a hat about his devotion to the cause of non-government [sic] intervention, yet he allows this practice to continue which gives a $50,000 gift to fortunate plate holders. I bet his department is standing over this arrangement like a cow over its calf, making sure that the minister does not get to see it.

What about the feather beds that fly? Well, the Holcroft Committee gave that bed an awful jolt in spite of the efforts of the Department of Transport (DOT) to shield it. Then the Modest Members insisted on having a closer look and did their best to disturb the bed. But at least a few changes were made and now the Minister for Transport, Ralph Hunt, who is both honest and intelligent, must know that his department is dedicated to government intervention in a big way. And I guess most people now realise that unless the Labor Party is in power when the agreement runs out, it is likely that the feather bed will be dismantled.

And what of the feather beds that float? Both of these are in the tender care of DOT and so, in the end, of Hunt. The first one, the shipping conference bed, gives particular advantages to the overseas shipping lines under the restrictive trade practices legislation, allowing the lines to make restrictive arrangements to make competition difficult.

This feather bed has not been examined by outsiders for years now, though there was a departmental Grigor Report which recommended the continuation of the system. But as the Australian National Line operates under the conference system, and knowing the attachment of DOT to people on their feather beds, I cannot help feeling sceptical about the objectivity of a departmental report.

The biggest feather bed of all must surely be the Navigation Act shipping arrangements which force interstate coastal cargo to be carried in Australian flag ships. Goodness knows what this is costing us. The IAC estimates that it costs BHP about $50 million a year, and in their report on iron and steel products they asked that the matter be examined. And the prestigious Australian Industries Development Association has also asked for an inquiry. The Jackson Committee said that it was cheaper to ship cargo from Sydney to London than from Sydney to Perth, and there are countless other examples. Surely the whole question should be opened up.

City slickers would not know that sometimes a cunning cow will hide its calf so that the boss cannot find it to wean it. Departments can get like that and then a lot depends on the boss.

***
14.
Bert Kelly, “Taking Canberra for a ride,”
The Bulletin, November 9, 1982, p. 136.

In May, 1980, I wrote a series of articles about the peculiarities of feather beds, those who lie on them and those who service them. There was even a rather lewd joke about the latter. I pointed out that feather beds were comfortable only if not crowded, so it was important to keep people off them. I wrote about feather beds that float and those that fly but the first one was the Canberra taxi feather bed.

I think it is time we had another look at this one.

In 1980 I quoted from an excellent Centre of Independent Studies pamphlet written by Peter Swan who told us that a Canberra taxi plate at that time was worth about $38,000 because the government refuses to licence more taxis. There were 4.7 taxis for every 10,000 people in Canberra while in Queanbeyan, a few kilometres away, there were 7.1 taxis for every 10,000 people and their taxi plates were worth $28,000.

He also told us that in London anyone could get a taxi plate if he demonstrated that he knew the geography of the city (no small accomplishment) and his vehicle and himself were up to standard. In London there were 12.5 taxis for every 10,000 people.

When I wrote that article, I expected some action would result because I foolishly thought that the exposure of a situation as silly as that would be enough to start the wheel turning.

But the only change seems to be that Canberra taxi plates are now worth about $55,000.

I must emphasise that this money goes to the plate owner if he sells it, not to the government which issues the licence. This is the same as some lucky people being given quotas to import a limited amount of clothing and footwear.

These quotas are now being sold for thousands of dollars, with all the benefit going to the quota holders and none to the government, with the poor purchaser paying the price. Feather beds are profitable only if the numbers on them are kept artificially low.

When I visit Canberra now I do not get a Commonwealth car, as I used to when I was one of the good and great, so I have to use taxis. As I watch the taxi meter clicking over I keep doing mental arithmetic trying to estimate how much extra it is costing me to pay the interest on the $55,000 the taxi owner had to pay for his plate.

However, I do not visit Canberra often do it does not worry me that much. But it really worries Eccles, who sometimes uses taxis to go to and from his ivory tower.

His mean, little, calculating mind always keeps coming up with quite astronomical estimates of what the government’s action in keeping down the number of Canberra taxis costs him every time he uses one.

When I wrote the first article, Bob Ellicott was Minister for the ACT and I suppose his mind was on higher things (he is now a judge).

But when Michael Hodgman became minister I told Eccles that I knew this rising star would take this piddling little problem by the throat and before long the whole silly business would have ceased completely.

I explained that I had heard young Hodgman make some perfectly splendid speeches about almost everything on Earth.

Eccles replied rather sourly that he had heard him make some off statements about the 25 percent tariff cut but I told him not to be one-eyed and to give the young man the benefit of the doubt.

Eccles is still edgy but I am quietly confident that Hodgman soon will have the problem beaten. The question he will be asking himself is why the numbers of Canberra taxis must be kept artificially low?

Doing this pushes up the value of taxi plates, so the cost of travelling in Canberra taxis also has to go up. He also will be pondering: If it is not necessary to limit taxi numbers in London, why does it have to be done in a little place like Canberra?

“Why not let market forces sort out the matter?” you can hear him asking his dedicated bureaucrats. “It used to be a Liberal principle not to interfere in business. Why are we behaving in this ridiculous way?” I can imagine him barking at his minions. I have heard him speak with moving eloquence about his dedication to Liberal principles. I am sure he is just the man to handle the problem.

Eccles and I have been trying to get Fred interested in this matter but to no avail.

He seems to think that Canberra citizens get too many things handed to them on a plate now and he doesn’t care if their taxi drivers take them for a ride. That is his joke, not mine.

***
15.
Bert Kelly, “Running to water on wages,”
The Bulletin, August 23, 1983, p. 110.

When the economic summit broke up, almost all the participants, with the notable exception of the National Farmers’ Federation spokesman, agreed that Australia should have a centralised wages system. I put it like that because I was not sure what a centralised wage-fixing system was, so I thought I should not express definite opinions until I found out more about it. As my political past fades into the distance, ignorance is becoming an increasing barrier to eloquence. I went to Eccles for instruction.

In his long-winded way, Eccles gave me a lecture about almost everything and then said that a centralised wage-fixing system was one where wages were fixed by Commonwealth or State arbitration commissions, or boards, with unions being registered and given legal powers denied to other groups.

In most other countries wage levels were determined by market forces, by the supply and demand for labour, but here, with our typical reliance on governments, we passed the responsibility over to them.

Eccles and many other people think that the readiness to fall into the government’s all-embracing and enervating arms comes from our convict past. I guess the convicts used to say at every crisis: “You brought us here; now you must look after us.” This is why we are so ready to rely on governments for assistance, for tariffs or drought aid. To most of the summiteers, going back to a centralised wages system seemed a natural way to behave.

An important justification for a centralised system is that it encourages everyone to keep in step. The plea for comparative wage justice is very powerful with us. If workers in a capital-intensive industry, such as oil refining, can wring a rise out of their employers, where the impact of such a wage increase does not get passed onto labour-intensive industries where the wage increases loom very large indeed. So the labour-intensive industry goes broke and workers lose their jobs but this is a sacrifice that has to be made on the altar of comparative wage justice.

Everyone has to be equal, even if it kills us.

Many Australians have an almost religious devotion to our centralised system, believing that it was handed down from On High or from history. The fervour of this attachment is well illustrated by a quotation from a speech by Mr Justice Higgins in 1919. Higgins is recognised as the designer of the Commonwealth arbitration machine and it was he who drove it when it began operating in 1904. It is worth noting that Higgins’ machine was not working very well when he made his speech. In the period between 1913 and 1919, 13.5 million days were lost through strikes and in each of the two years 1917 and 1919, more than four million days were lost at a time when our workforce was less than one quarter of what it is now.

With this record in mind, what did Higgins say in his 1919 speech? I quote him:

There should be no more necessity for strikes and stoppages in order to obtain just working conditions than there was for the Chinaman of Charles Lamb to burn the house down whenever he wanted roast pork. The arbitration system is devised to provide a substitute for strikes and stoppages, to secure the reign of justice as against violence, of right against might.

In a recent ANZAAS paper, W. Brown and L. Rowe (both of the Confederation of Western Australian Industry), after quoting Higgins, say:

That the redoubtable Henry Bourne Higgins, perhaps the most tenacious myth-maker in Australia’s modern history, could blindly assert these things after presiding over the most disastrous periods of the country’s industrial relations experience is testimony to his total commitment to building up a particular system and to the power of propaganda …

He was not one to allow the reality of experience to dissuade him from his self-appointed mission.

So much for the fanatical attachment of many people to our centralised system. But other forces are at work for better ways of fixing wages. The chief of these is political cowardice. Way back in 1929, when most of you were still a gleam in your parents’ eyes, Prime Minister Bruce lost government — and his seat — by advocating the abandonment of our dual system, that is State and Commonwealth, driving the arbitration machine. He wanted the responsibility left with one or other, not both. Since then, all politicians have run to water rather than face the risk of altering our present system in favour of one where wages are fixed by the market rather than by the government. Yet we all know that our system works badly. It is hard to imagine other countries’ systems doing even worse.

***
16.
Bert Kelly, “Centralising confrontation,”
The Bulletin, August 30, 1983, p. 96.

Last week I discussed the hopes of people for our centralised wage-fixing system. This week I will examine some of its faults.

Its greatest fault is that it institutionalises confrontation between employers and unions. All parties to an industrial-relations argument know that the arbitration machine stands ready nay, eager, to settle arguments. So, the skills and experience needed for fruitful negotiation are not used as they should be. Gerry Gutman, author of The Retreat of the Dodo, summed up the matter with his usual pungent and picturesque language when he said recently:

After three-quarters of a century of compulsory arbitration, employers and unions find that their faculty to resolve disputes through discussion and bargaining has atrophied much as Chinese ladies of the imperial periods lost their ability to walk after many years of being conveyed in sedan chairs with bound feet. It is in this sense that our system of compulsory arbitration has crippled Australia’s industrial relations.

The second grave fault with our system is that the arbitration machinery is designed (or is operated) to make employers obey industrial law while unions are exempt from any real compulsion. Deputy President Isaac admitted this recently when he said: “The logic in the argument that it is undesirable to have compulsory arbitration without legal sanctions is difficult to refute.” But he goes on: “One finds oneself in a very uncomfortable position between the compelling logic of such an argument and the more realistic and expedient view of what is feasible in industrial relations.” His Honour is really saying, the law should be enforced but the Arbitration Commission is powerless to do so. There is a law for the employers but none for the unions.

Another weakness is the way our system is surrounded by legal language and trappings. Imagine how Fred would have reacted if he had heard a High Court judge say the following when discussing preference to unionists:

The wording of the proviso to Clause 2(a) appears involute and to have aberrations of tenses and in the use of the subjunctive mood. But if the meanings of both the protasis and apodosis sufficiently emerge we need not be concerned by inelegancies appearing in syntactical analysis … The question is not one of lexicography but of semantics in the proper sense of that word. It is the concept of preference in employment as understood in the context of Australian industrial law.

Eccles talks like that which is one of the reasons nobody listens to him.

Another weakness is that our system encourages the cargo cult mentality. As W. Brown and L. Rowe (of the Confederacy of Western Australian Industry) say in their recent ANZAAS paper:

From the earliest times, industrial tribunals have taken the view that the settlement of disputes and the setting of appropriate rates of pay could be done without regard to the economic consequences of their decisions … Is it any wonder that there has been a lack of awareness about economic reality by workers at the enterprise level? There always seemed to be another money basket out there in the commission which could be unlocked in response to verbal incantations recited before an industrial altar.

George Polites, a nationally-known spokesman for employers, who is retiring, thinks that most of our industrial relations problems spring from the almost universal expectation of unionists that the commission can be relied on to pull a rabbit out of the hat in defiance of economic laws. Yet we should know that, as the employers’ spokesman said at the wage hearing in 1982: “In the final analysis, economic circumstances will dictate the level of wages and employment we can maintain and there is no supernatural power residing in the commission to change that.”

Our present centralised, industrial-relations system reminds me of the old crawler tractor I bought when I changed over from horses years ago. My old dad told me that crawler tractors were far more reliable than the steel-wheeled tractors then operating. But these were soon supplanted by pneumatic-tyred tractors and these were far cheaper, more efficient and more flexible. When Fred suggested that I should buy one of these new-fangled machines, I smartly told him that my Uncle Bruce had discarded his crawler tractor way back in 1929 and he was soon sorry.

So, for the next 35 years I persisted with crawlers till my son got control of things while I was busy governing the country. He changed over smartly to a rubber-tyred tractor to our great financial advantage. I have a feeling that one day we will scrap our outmoded centralised, industrial-relations machinery in the same way.

***
17.
Bert Kelly, “Shaking up the feather bed,”
The Bulletin, September 6, 1983, p. 120.

Last week I was critical of the way our arbitration system operated. This week we will examine why changing it is so hard and why we have so much faith in a failed system.

People will tell me that countries which operate other systems have almost as many strikes as we do or that their strikes are bigger, if fewer, than ours. Eccles says that this is so. But it is not the number of our strikes that worries me so much as the way our system encourages confrontation between unions and employers. We have become a nation of clock-watchers, grimly determined that we should not put in an atom of effort more than the arbitration awards demand.

Workers in the US agreed to a reduction in pay in order to get business on its feet again. Can you imagine our unions behaving like that? Ours seem convinced that they should try to bleed their bosses white, even if unemployment is the inevitable result.

This bias towards confrontation must be the main reason why our economic performance is so poor compared with our neighbours’. We have so many more natural resources than they do but they are growing far faster than we are. It is true that our tariff policy encourages us to produce things we are not good at, to produce the wrong things. But far more important is that we tend to make them in the wrong way, with a workforce that concentrates on trying to grab as much of the boss’s cake as possible rather than trying to help him make the cake bigger. You should ask BHP about this.

Why, then, do we have so much difficulty in changing our present system which almost everyone admits is working so badly? I suppose one reason is that, because it is ours, because it is a uniquely Australian institution, it must be good.

We used to think like that about our cricketers. The Arabs have a proverb: “Each man thinks his own bug a gazelle.” But it is still only a bug.

The chief reason for persisting with our present system is that most of our industrial relations experts support it. There was a time when that would have been sufficient evidence to convince me but not now.

Do you remember the feather bed analogy that I have used before? The people on feather beds naturally become attached to their beds, be they airlines, owners of hen or clothing quotas or owners of taxi plates. In industrial relations we have given the unions a place on their feather bed, protecting them from competition from outsider unions by registration, by exempting them from laws that apply to other groups and so on. So naturally the unions are attached to their feather beds.

But it is not only the occupants of the feather beds who want them left undisturbed. Just as dedicated are those who service those on the beds. In the industrial relations field, the high-priced advocates and lawyers, the arbitration commissioners and indeed the whole arbitration industry want to see the arbitration bed cared for. And most of the employers’ industrial experts want it, too.

After all, they have got to their present positions by operating the system; so , naturally, they do not want to see it disturbed.

Most of the officers in the Department of Industrial Relations behave in the same way. They climbed the hierarchical ladder by gaining the reputation of being people who understand how to get on by drinking with their union buddies in smoke-filled rooms in Melbourne pubs. They see this as the proper way for departmental officers to solve industrial relations problems. They don’t want to see our system changed.

So the unions on the bed and the experts who care for them there naturally want the present system continued.

So, to go back to last week’s tractor analogy, we will persist with out out-moded arbitrated crawler tractor while our neighbours go whizzing past us driving their much more efficient and flexible rubber-tyred machines.

The government has appointed a high-level committee to advise it on ways of improving our present arbitration machine. The chairman is Professor Keith Hancock, of Flinders University, and the other two members are George Polites, just retired as chief spokesman for employers, and Charlie Fitzgibbon, of the Waterside Workers’ Federation.

You could not get three better people to advise about the theory, operation and servicing of our present crawler tractor but I fear that they will not pretend to examine other models which work far better in other countries — that they will try to make our old girl work a bit better.

What about scrapping it for a more modern machine that can help us compete with our neighbours?

***
18.
Bert Kelly, “Knocking the stuffing out of feather beds,” The Australian, July 8, 1985, p. 7.

Many years ago Eccles gave me a lecture about feather beds, how they effect the behaviour of those who lie on them and of those who look after them.

Unfortunately he used the phrase “the people who serve them” and this confused me because, being a bushie, the word “serve” had rather intimate connotations for me.

So when Eccles referred to those who serve the occupants of feather beds, he was speaking as a city slicker and not as a bushie. He then went on to give me lectures about the feather beds that fly (our two-airline policy), those that float (shipping conferences and coastal shipping) and those that run on roads (Canberra taxis).

I have dealt with these in a modest way but have yet to tackle the feather bed that runs on rails (the railways). Eccles is gathering the material for this.

My recollection of Eccles’ feather bed lectures was prompted by reading some of the papers delivered at the Flights of Fancy seminar arranged by the Monash University Centre of Policy Studies in Melbourne on June 19.

Its task was to compare how the American airlines have operated since they were almost completely freed from government regulation in 1979 with the way our strictly regulated airline system is working even after making allowance for our smaller population and more empty spaces.

It is true that some American airlines have gone bankrupt but some did this before.

There is no doubt that most US air travellers are far better served since deregulation and, after all, I suppose satisfying air travellers should be the main function of airline operation rather than making operators more comfortable on their feather beds.

While I was browsing through the seminar papers, I found one written by Christopher Findlay of Adelaide University, who described the fear and dread with which the problem of deregulation was first approached in the US.

Poignant pictures were painted of airlines cutting each others’ throats, of corners being cut in safety measures, making air accidents common, small cities being left isolated and so on and on. But the main fear was that the poor air travellers would be left to the tender mercy of rapacious airline operators.

Actually, all these fears proved unfounded. Americans would never even consider re-regulating their airlines.

Now if there had been a committee appointed to inquire into whether US airlines should be deregulated, particularly if its members were drawn from the operators or those who serviced them, you can imagine the frightening pictures of imminent disasters they would have painted.

“What madness it would be for us to recommend taking such a risk when all other countries regulate their airlines,” you can imagine them saying. “You want us to get out on our own. No one has done this before.”

As I was thinking thus, I suddenly realised that here was a parallel with the Hancock committee which inquired into our industrial relations system.

Its members were from the “Industrial Relations Club”, either on the feather bed or servicing it. They were the experts, they knew where past bodies had been buried, they knew the pitfalls that were waiting for those who broke new ground.

So it is not surprising that they said that they had no examples before them of the beneficial effects of deregulating our wages system. Yet all over the world there are examples of other systems working far better than ours.

But no one came before the committee who could spell out in clear terms exactly what would happen if we deregulated our own deeply entrenched system. Of course no one could do this because none had tried. Someone had to try first.

This is what they did in the US with their airlines and without any blueprints to guide them. If those on their airline feather bed and those who serviced them there had had the responsibility of advising the US Government whether or not to deregulate, there would have been a loud emphatic “no”.

Americans are fortunate that the people who made their decision had enough confidence in what competition and deregulation could do to put a fire in the bellies even of people who had recently spent far too much time on feather beds while being cared for by dedicated bureaucrats who had a vested interest in keeping them there.

It is a pity that the Hancock committee was not cast in that mould.

***
19.
Bert Kelly, “How a sweet cop turned an industry sour,” The Australian, February 25, 1986, p. 9.

I have written before about feather beds that fly (two airline agreements), feather beds that float (conference and coastal shipping) and feather beds that run on roads (taxis). I have promised that one day we will examine beds that run on rails but these must wait.

Today, I will concentrate on the sugar industry feather bed which used to be a very comfortable place on which to lie but which suddenly seems to have lost most of its feathers.

I pick on sugar because the mess it is in should be a warning to farmers in their present crisis not to let the Government help them in the wrong way. We should demand that the Government remove some of the loads they have put on our backs, the tariff burden, the coastal shipping burden, high interest rates made necessary to keep the exchange rate higher than it would go if left alone, the tax on fuel and so on.

Removing these burdens would be really helpful, but do not, I beg you, let the Government help you in the way it has helped the sugar industry, and indeed the dairy industry in the past, by sheltering them from the painful traumas of change.

In August, 1984, when describing the regulations that wrap sugar in a cocoon of red tape, I quoted the retiring chairman of the Central Sugar Cane Prices Board who said the regulations of the Sugar Cane Producers Act “creak and groan like an old unoiled windmill”. This picture is mild compared with that drawn by Mr J.R. Savage at the recent Outlook Conference.

Mr Savage, who was chairman of the working party appointed to inquire into the sugar industry’s problems, spelt them out with devastating frankness:

The sugar industry, from land usage to refining, and the importation of sugar, is the most regulated industry it would be possible to conceive …

There has been little change in the legislative structure since 1915 when it was a struggling infant industry … In Australia’s highly regulated industry no changes have taken place without the industry asking the Government for that change.

Nearly every time there has been a world shortage of sugar and prices have risen, the industry, or the majority of it, has sought increased production, and because of the time lag due to inquiries, legislative processes, etc. the increase has usually come on the market in time for the next slump … It is my basic philosophy that, because of their lack of flexibility and accountability, government and bureaucratic control should be completely removed from day to day activities of industry and from any involvement in marketing activities.

What a picture, and in Queensland too! Bitter experience has taught the rest of us not to depend on government’s direction on how and when to sell our produce.

We know that any commercial directions we get from government have been filtered through wise government servants. We also know that a government servant who has the ability to correctly foretell the supply and demand for any crop is not for long working for government. He is shortly sitting in the south of France with his feet in a bucket champagne!

But evidently this knowledge has not yet reached Queenslanders who must still have a pathetic belief in the wisdom of governments. Yet Joh is always thundering about the evils of socialism!

Sugar growers love being cared for by wise government. They want government to tell them how much cane to grow, where to grow it, when to harvest and where the sugar mills must be … Only “fit and proper persons” are allowed to enter the industry. It is all very cosy. Round and about and underneath them are the Government’s everlasting arms and they love it that way.

However, let Mr Savage again speak for himself — he knows much more about sugar than I do:

The structured web of legislation in which the industry finds itself, and which is strongly supported by the troglodytes of the industry, does not provide sufficient gaps through which the industry can extract itself to make meaningful decisions regarding its own future … Unfortunately the effect of this comforting restrictive web has now permeated the thinking of the majority of the industry and severely restricts its ability to react or change.

You can see now why I beg farmers not to let governments help them in the wrong way. Fred has abandoned his idea of migrating to Queensland to escape southern socialism. He says he prefers the devil he knows.

***
20.
Bert Kelly, “The feather bed on rails sure runs against the grain,” The Australian, June 30, 1986, p. 11.

I have often written about the feather beds that float, fly and run on roads, but I have put off dealing with the biggest feather bed of all, the one that runs on rails.

However, the Hussey report on grain handling costs and his comparison between our railway charges and those of our competitors in Canada and the US has exposed such a serious position that it can no longer be ignored. I am sorry for any keen administrator who tries to make our railways operate efficiently.

At the 1985 Agricultural Outlook conference and at the recent transport seminar in Sydney arranged by the Rural Development Centre of the University of New England. I heard Mr Paul Grimwood give papers which bravely and competently faced up to the mess that the West Australian railways (Westrail) is in.

He should know because he is its director of finance and planning. He gave us hope that things might be better soon and perhaps the improvements have already begun.

But the deadweight of past investment decisions and out-of-date practices must hang around any railway administrator’s neck like an albatross. He would be uncertain whether the railways were to be operated to carry grain in competition with road transport or whether they should be managed to provide comfortable employment for as many employees as possible, or to supply cheap travel for pensioners or railways staff on holidays.

For instance, if a heroic effort were made to cut costs by using two-man train crews instead of the present three, there would be a howl of anguish from the unions who are certain that the main reason for operating a rail system is to maintain conditions of employment that were perhaps suitable 30 years ago. I am told that modern diesel locos still have to be served at the same locations as steam engines were 30 years ago, even though they may not need it.

Here is another example of how the unions sit on the heads of railway administrators. Australian National Railways want to divert the Indian Pacific train from Crystal Brook to Adelaide to increase its attraction to tourists. But the NSW and South Australian branches of the same union cannot agree which branch should work the train on its altered timetable, so the change cannot be made. You can imagine how difficult it must be to make changes when contending with inertia of this kind.

It is hard to measure how bad the railway performance really is. Our railway administrators resent comparisons being made between our tonne-km rates and those of the US and Canada, even charges for grain carried over the same distance.

For instance, in 1985, for a 650km haul, the Canadian charge was $A15.47 per tonne, NSW $A25.48, and Victoria $A27.34, and so on. Grimwood claims that such comparisons are invidious though he does not say why. But he is a competent and dedicated transport expert so we must accept his decision.

But other transport experts seem to regard the railway performance with more jaundiced eyes. For instance, the co-ordinator general of transport in Western Australia, Dr John Taplin, said in 1983:

Railways are just businesses that went bad; if they were not government owned, they would have passed into history or have been radically restructured.

I have no doubt that since then Dr Taplin and Peter Grimwood have been doing their best to clean up the WA mess but there still seems room for improvement, as this quotation from Hussey’s book shows. He says:

In 1966 the West Australian Transport Act allowed grain growers to transport grain by road without restriction provided they owned the means of transport. In the case of a semi-trailer, the law applied to the trailer only and not to the prime mover. Innovative farmers bought trailers (much the cheapest component) and engaged contractors to provide the prime movers.

Exploitation of this loophole increasingly threatened the railways. In 1981 the legislation was amended to require the prime mover also to be owned by the grain grower. The innovators responded by entering short-term leasing arrangements with cartage contractors and hiring the contractor as an employee driver. Under the arrangement, for the period of harvest, the grain grower was, for all relevant purposes, the owner of the means of transport. The regulators response was to amend the Transport Act again in April 1985.

A detailed study would be required to ascertain the benefits and costs arising from this saga. Suffice it to speculate on the benefits to grain growers and the community if this creative ability and energy had been channelled into improving the system rather than trying to beat it.

So clearly WA grain growers seem to think there is still room for improvement in the Westrail system or they would not be trying hard to have their grain carted more cheaply. After all, this seems a reasonable goal, particularly with grain prices so low.