Economics.org.au

1. P. P. McGuinness, “The strange case of the ‘close watch’ on rising tariffs,” The Australian Financial Review, September 12, 1972, pp. 2-3.
2. P. P. McGuinness, “We are nearly all socialists now,” The Australian Financial Review, October 8, 1974, p. 3.
3. P. P. McGuinness, “The cry of the hip-pocket nerve,” The National Times, June 30-July 5, 1975, pp. 47, 51.
4. P. P. McGuinness, “The socialists always win,” The Australian Financial Review, December 2, 1975, pp. 3, 6.
5. P. P. McGuinness, “How to influence the new Government,” The Australian Financial Review, December 16, 1975, pp. 3, 10.
6. P. P. McGuinness, “Too much protection can lead to a nation of cripples,” The National Times, October 24-29, 1977, p. 54.
7. P. P. McGuinness, “Tariffs: A case study in academic failure,” The Australian Financial Review, September 5, 1978, p. 4.
8. Padraic P. McGuinness, “Caught between a frock and a harsh, post-modern place,” The Sydney Morning Herald, March 26, 1998, p. 19.
9. Appendix for Economics.org.au readers

1.
P. P. McGuinness, “The strange case of the ‘close watch’ on rising tariffs,” The Australian Financial Review, September 12, 1972, pp. 2-3.

Although it is clearly in the interest of the Australian economy that Government departments should get to know the problems of all sectors of industry, and seek to understand their problems so as to be able to plan wisely for industrial development of industry, it is, nevertheless, not the case that the interests of individual companies and industries are necessarily identical with the interests of the community.

Thus, in assisting industry any Government department should be careful not to step out of its primary role as servant of the community as a whole to become the servant of particular interests.

Moreover, although it is desirable that Australia should develop and diversify the manufacturing sector of the economy, it is not the case that any manufacturing activity is desirable, regardless of whether Australia has or has not a comparative advantage in that line of activity with respect to the rest of the world.

The Department of Trade and Industry, however, and the Office of Secondary Industry within the Department, often seems to argue along the lines of the classic American proposition, “What’s good for General Motors is good for America.”

And so undiscriminating is the enthusiasm for any industrial development whatsoever, that it often seems that the boundary for proper behaviour of a government department has been crossed, in the interests of promoting private profits in industry at the expense of the efficient operation of the economic system and the development of a balanced pattern of international trade.

Thus, as part of its “endeavour to do the job that you people wanted done” (as Mr Callaghan put it to Australian Industries Development Association), OSI has on a number of occasions set out to give active guidance to various lobby groups and industry groups in their attempts to influence government. Such activities have, of course, generally been carried out behind closed doors.

However, an exception was an address to the first national convention of the Metal Trades Industry Association in October, 1970, by Sir Alan Westerman, then permanent head of the DTI (and co-founder with Mr Callaghan of OSI).

So Alan is now, of course, executive chairman of a statutory corporation, the Australian Industry Development Corporation, which besides having so far received $50 million in government funds, has wide borrowing and investing powers. The AIDC is very largely staffed by former members of OSI.

Sir Alan was reported as saying that it was not commendable for a sector of industry which contributed 40 per cent to gross manufacturing production to ask no more of government than a clear indication of the rules of the game. He advised them that industries within the group would hang separately if they association did not make a substantial contribution to the business of national policy-making.

By this, he seemed to be arguing that “the rules of the game” should be changed when they were not in the interests of MTIA.

In this speech, he also introduced a novel concept of the criterion that should be used in determining, for tariff purposes, what an “efficient” industry was. He suggested that, even though the pattern of Australia’s trade had shifted away from Britain and towards Asia, efficiency should be measured as a relationship between Australian costs of production and United Kingdom costs.

“Have you become efficient overnight?” he asked.

The proper answer, of course, ignoring the period of transition which was rather longer than a night, is yes.

There is no advantage to Australia in attempting to maintain an industrial structure oriented towards Britain when we are not trading with Britain as we used to.

It is senseless to propose that the efficiency of our industries should not be judged by comparison with those of our major trading partners.

But, predictably, Sir John McEwen took up the same theme in Parliament.

One of the less publicised examples of OSI assistance to lobbyists concerns a document which has been around now since early 1971, entitled Australian Tariff Policy and its Objectives. This is usually referred to as the “McGrath submission,” since it has been pushed hard by Sir Charles McGrath (chairman of Repco Ltd, vice-president of AIDA, a director of AIDC, and Federal Treasurer of the Liberal Party), and was submitted by him to the Prime Minister.

Although in the introduction to the document it is stated that it had been “prepared by experienced executives in manufacturing industry whose companies cover all States and diverse activities,” it was in fact prepared by a small group of lobbyists with the assistance of OSI.

This document is rather more sophisticated in its presentation than the usual protectionist case, but it displays the same weak grasp of economics as other productions of OSI.

After remarking that “the overall growth of manufacturing has been a vital element in bringing about a balanced developing economy,” it is asserted that, “without this sustained growth and without reasonable security in the home market, unit costs of manufacturing industry due to inflation would have risen at a much higher rate and expansion of export markets would not have been economically practicable on the scale now achieved.”

Again, there is here a quite inconsequential use of economic terminology. What counter-inflationary influence do “sustained growth” and “security in the home market” have? Economic growth is usually accompanied by inflationary pressures — that is one of its problems.

A slowing down of growth, and cut-backs in production when economies of scale operate (when average, or unit, costs are falling) can, indeed, lead to price rises — but only when the firm involved is in an oligopolistic or monopolistic situation. This will usually be the case when it has a secure home market. Security of home markets is conducive to inflation, not the contrary.

The McGrath submission suggests that, since the Tariff Board is not handing out the kind of protection which manufacturing industry would like to become accustomed to, the Government “should require the Office of Secondary Industry to prepare a list of nationally important major manufacturing industries, to be approved by the Government and to be revised from time to time. When any of these ‘key’ manufacturing industries is referred to the (Tariff) Board, this would then be done by means of an appropriately worded ‘policy reference.'”

The submission suggests as the wording of a policy reference: “What method and level of assistance is necessary to ensure the profitable and balanced development of an economic and efficient XYZ industry?”

In an attachment to the submission, there is suggested the possible form of a government policy statement on the tariff, where detailed rules for the Tariff Board to follow are laid down. These include: “In considering whether an industry or any segment of it is economic, the Board shall compare the industry with like industries in countries with living standards similar to Australia’s and not with those in countries with significantly lower living standards or with State-controlled economies.”

That is, it should ignore nearly all our present and potential major trading partners.

The submission, further, is not content simply with advocating higher tariffs; it wants import quotas, too. As is well known, import quotas are an absolutely foolproof way of ensuring “security of home markets”, such that manufacturing can raise prices to their hearts’ content, without any fear of import competition at any price level.

It justifies the introduction of import quotas and other non-tariff barriers on the naughty-little-boy principle: If the others are doing it, why shouldn’t I?

Mr McMahon, to his great credit, rejected the submission; but, clearly, great pressure has been put on him to accept at least some of its propositions.

OSI does not confine itself to such general approaches, however: its hand can be seen in many specific cases.

One is that of the chain manufacturing industry. Over the years, the Tariff Board has conducted about seven enquiries into the chain manufacturing industry, five of them since the mid-50s. The board has generally recommended moderate rates of assistance for the industry, and has often expressed reservations about the increases in rates of assistance requested.

Thus, in the most recent report (June 26, 1970) on the industry, the board said, of general purpose chain, that “most local production of chain in this category is uneconomic and will remain so unless the industry can employ the techniques and equipment necessary to considerably reduce its costs. This would appear to involve specialising on volume lines or securing large export markets …”

However, the board had earlier noted, commenting on a submission by Australia’s main chain manufacturer, Renold’s, that “Renold’s costs are very high in relation to those of manufacturers in Britain, which is not normally regarded as a low labour-cost country.

“In the board’s view, Renold would have substantial cost disabilities against any overseas producer whose market is large enough to allow the use of the most efficient production processes.”

However, despite the frequency of reports on chain, and the resulting probability that the Tariff Board would have a pretty accurate idea of the true position of the industry, the OSI is at the moment formulating proposals to impose quantitative restrictions on the importation of chain and chains, so completely insulating local manufacturers from import competition. It is believed that these have been approved by Cabinet and will be announced this week.

It is relevant in this respect to note that Renold’s main plant is located in the electorate of the Honourable R. McN. Holten (Country Party MP for Indi, Victoria), who is the Minister assisting the Minister for Trade and Industry.

Another noteworthy case of OSI concern for the interests of a large (and foreign-owned) company is that, now well-known, of the “Fibremakers protection cycle.” Fibremakers Ltd is not itself so big, but it is a wholly owned subsidiary of ICI, which is big, and which is one of the major companies behind AIDA.

OSI has drafted and sent seven references to the Tariff Board regarding protection for Fibremakers since 1962 (the company is, locally, a monopoly producer); after each of the Tariff Board reports, OSI has observed the situation, and, when imports have increased, it has sent a further reference to the Special Advisory Authority requesting emergency assistance pending a further reference to the Tariff Board. Since 1962, there have been five such references.

Thus, in all, there have been twelve inquiries into Fibremakers over the last 10 years, with the Tariff Board consistently recommending moderate levels of protection, and the Special Advisory Authority, Sir Frank Meere, in effect reversing the Tariff Board recommendations and granting high protection.

What is so special about Fibremakers, in what way is its monopoly of the local market for polyamide (nylon) and polyester synthetic yarns essential to our national interest, to justify such an abuse of the system of tariff determination?

Then there is the case of the plastics industry. Not so long ago, the Tariff Board carried out a detailed inquiry into the local plastics industry and, as a result, recommended changes in tariffs — some increases and some cuts. This new scale of tariffs was implemented.

OSI was, however, clearly not happy with this, and set up a plastics industry committee, the purpose of which was “to review developments in the industry and adverse trends in import competition arising from the implementation of revised levels of protection,” and “to assist in any way the development of the plastic products industry in Australia” (Plastics News, July, 1972).

It is hardly necessary to add that OSI’s committee is not, for the moment, worried about those sections of the plastics industry which obtained increased duties, since “it is not considered that the Tariff Board’s decision will lead to immediate hardship” in these cases.

Numerous other examples of this syndrome can be cited. For example:

Tariff Board report on hand and interchangeable tools (released July 28, 1972): “Developments in the industry following the tariff changes will be watched closely,” said Mr Anthony.

Tariff Board report on brined cherries (released November 13, 1970): “A close watch will be maintained on the marketing situation,” said Mr Chipp.

Tariff Board report on steam engines, boilers and power units (released February 11, 1972): “It is intended that developments in the industry following these duty reductions will be kept under close watch,” said Mr Anthony.

So it goes. It seems to be generally the case that, after the Tariff Board has carried out a detailed inquiry into an industry, the conclusions of the inquiry, however well founded, are unacceptable to OSI and the Department of Trade and Industry unless they are such as to raise tariffs or otherwise restrict competition from imports.

Nor, however, does OSI confine itself to “watching closely” when Tariff Board recommendations which it does not like are accepted, and working to reverse them.

At present, OSI is actively lobbying for assistance to two important areas of the Australian electronics industry.

As with most of its other favoured sectors, it seems prepared to push these interests regardless of the possible effects of its policies on other industries, and regardless of the effects on consumers. These two areas are television and computers.

When the Department of Trade and Industry sent its string of tariff review references to the Tariff Board last year, one important item which was absent, and which normally would be included with household appliances, was television sets.

There was a quite valid reason for this; Government policy on the introduction of colour television had not by then been formulated, and it was presumably thought desirable to hold this reference until Government policy had been decided.

The official announcement that colour television would be introduced as from the beginning of 1975 was made as long ago as last February, but the Tariff Board does not yet appear to have received the DTI reference on television sets.

This is because OSI is examining the possibilities of obtaining even higher protection for the local manufacture of television receivers. The two large electronic firms Philips and AWA (the former overseas-owned) who are looking into the possibility of setting up a joint manufacturing facility for colour television tubes in Australia are hoping that OSI will arrange increased protection for them, and thus assure them of dominance of the Australian market.

Since the market in Australia for colour television sets will be very small by world standards, the local industry, even if there is only a single plant, will be well below the minimum economic size for effective competition against imports in the absence of high tariffs — and there is little prospect of ever obtaining export markets in competition against the Japanese which would permit the industry to expand to an economic size.

In order to ensure the security of the home market for the local producers of colour television, OSI and the companies are considering ideas for raising the level of protection to such an extent that overseas-manufactured colour sets will be completely excluded from the Australian market.

It is not possible, naturally, to predict what the retail price of a standard screen size television set will be as a result of such protection, but the best current estimates put it at between $800 and $1,000, with the latter figure more likely.

The manufacture in Australia is already heavily protected, without even taking account of the additional duties which are being cooked up. The duty on television sets at the moment is $50 a set, plus 12.5 per cent of the value of the rest of the set. Thus an imported set with a factory price of $100 would attract a duty of $70-$80.

In addition, there is a sales tax of 27.5 per cent levied on the price of a television set (including the duty); this increases the impact of the tariff on the retail price.

It is roughly true to say that half of the retail price of a television set in Australia is attributable to the tariff.

If OSI succeeds in its campaign to impose extra duties on imported colour television sets, they will, of course, be much too expensive for most people. And since the tariff schedule does not discriminate between black and white and colour television at present, it is quite possible that the new, higher rate of duty will also increase the price of black and white television sets.

OSI’s attitude in this case is fairly typical of its selective approach to protection; they do not care that the ABC and the commercial television stations will incur huge costs in switching over to colour and hence will need to attract large numbers of colour viewers; the high price of television sets in the event of protected domestic manufacture will decimate potential audiences.

Nor do they care that these high costs will inevitably lower the capacity of the television stations to purchase locally produced television programs. Colour production is, of course, much more expensive than black and white production; the increased costs of the stations will inevitably drive them to look for overseas colour productions which are cheaper than local productions looking for their first sale.

This will, also, mean that the possible development of overseas markets for Australian films will not develop as quickly as it could, because of the shortage of funds for local production.

In fact, such a price as is suggested for local colour television sets would effectively cripple the television program production and broadcast industries for years.

Foreign-owned companies like Philips would not, of course, be greatly worried about this.

Next, let us consider the other area of the electronics industry of special current interest for OSI — the manufacture of computers.

Computers are and will increasingly become a major item of capital expenditure for all companies and government. So far, OSI has confined itself to quiet inquiries, but their interest in the question has had some public manifestation.

One of these was a reference to the Tariff Board on whether assistance was needed by local manufacturers of cathode ray display terminals, an important peripheral item in many computer facilities. It is likely that this is a test case by which to judge the Tariff Board’s attitude; whether future protective moves are channelled through the board, or other means are sought, will depend on this report.

Then there was the speech which AIDC executive chairman Sir Alan Westerman gave to the Computer Society three months ago. Sir Alan was, of course, permanent head of the DTI before he took his present job.

In this respect, it is worth keeping in mind that the AIDC has invested some $150,000 by way of equity and loans in a Canberra-based electronics company, Information Electronics, which produces cathode ray display terminals.

Since then, it is believed that IE’s liquidity problems have resulted in still more money being lent by AIDC.

And when commenting on the investment in IE (Financial Review, November 15, 1971) Sir Alan indicated that AIDC had another electronics company “on its books.”

In his speech to the Computer Society, Sir Alan said: “The AIDC is currently engaged in a study of the electronics industry in Australia. We are particularly interested in the smaller firms, partly from the viewpoint of future rationalisation and their being given some financial backbone.”

So long as the “financial backbone” which Sir Alan has in mind remains just capital and management assistance, AIDC’s interest is nothing but praiseworthy. This is, indeed, the kind of thing Australian industry needs; perhaps the AIDC might next turn its attention to the chemical industry, or even banking.

But, ominously, in the same speech Sir Alan drew an analogy with the local-content program of the car industry:

“There are some analogies, I believe, between the development in Australia of industry generally, the motor industry in particular, and the development of the computer industry.

“Overseas manufacturers seems always to go through the stage of opposing even the smallest component production and adaptation in Australia. Then one or more — I hope — will see the light, take the plunge, and others must follow in the development of a worthwhile industry and, in good time, worthwhile exports.”

To whom? one might ask.

Presciently, Sir Alan predicted government assistance to the local industry in the near future:

“I think the time is not far off when this will start to become a major factor in the reckoning. It may come initially through isolated cases of tariff protection. It may come through ‘local content’ and ‘offsets’ in Government and military supply contracts. And eventually, if we are to take any notice of history, it may come in the form of a selective ‘local content’ program. If this covers a wide enough range of computer equipment, it may drag some reluctant foreign firms into Australian industry.”

This gives a pretty fair idea of what Sir Alan and OSI are planning for the computer: a disaster similar to that which has overtaken the motor-car industry as a result of the absurd local content program designed by Sir Alan Westerman and Mr Callaghan in 1966.

This particular piece of economic quackery has burdened Australia with a ridiculously fragmented and high-cost motor industry, the benefit of which has accrued chiefly to the components manufacturers.

These are, themselves, heavily protected. The chief manufacturer of components in Australia is Repco, a highly profitable enterprise. Repco’s chairman, Sir Charles McGrath, apparent author of the submission referred to earlier, is a director of AIDC.

One of Repco’s subsidiary companies, W. G. Booth Pty Ltd, is engaged in the supply of high quality electronic components.

We can confidently look forward to a plan emanating from OSI for a local content program in the computer industry.

There is, however, a danger that such a program could lead to the kind of support activities which OSI has promoted in the past for the local-content program in the motor industry; and some of these activities have been such as to give the impression that Australian foreign policy is being made not in the Cabinet room, nor in Foreign Affairs, but in the ubiquitous Department of Trade and Industry.

***
2.
P. P. McGuinness, “We are nearly all socialists now,”
The Australian Financial Review, October 8, 1974, p. 3.

There is a great amount of rhetoric concerning the Australian economy, and economic policy, which is conducted in terms which are almost totally meaningless.

Words like “socialism” and “capitalism” are thrown about with abandon; there are impassioned defences delivered of one kind of economic system or another; and the “free enterprise” system is one of the favourite terms of the various business lobby groups.

But it is strange how close together the advocates of free enterprise and the self-described socialists are in Australia these days.

Dr Jim Cairns, for years the bête noir of the free enterprise system, now seems to be accepted as one of its main defenders, while the Whitlam line of economic policy, which is posited upon the promotion of market forces, is described as some evil form of socialism.

It was amusing, over the long weekend, to have to address two separate conferences held at Sydney University, at which at one session — in a conference organised by the Graduate Business Students’ Club — the director-general of the Associated Chambers of Manufacturers of Australia spoke and at the other the leading address was by one of the better known of the younger self-styled “racial economists” — the Marxian socialists who are criticising the kind of economics being taught in the universities.

For the astonishing fact emerged that the advocate of the manufacturers and the advocate of the proletariat and the unions were in almost total agreement.

On the other hand, Mr Bill Henderson of ACMA complained that the Government was not helping manufacturing industry enough.

Mr Henderson, in fact, argued strongly for the need for protection by means of Government policy measures for “free enterprise” in Australia. He also supported the setting up of some kind of national economic council, and the development of machinery for indicative planning.

In the subsequent discussion, he was strongly supported by Sir Robert Webster, the chairman of Bradmill Industries, who was most concerned to point out the necessity of protecting the highly efficient Australian textile industry against unfair competition by inefficient Asian textile producers.

In other words, the representatives of the manufacturing sector in Australia were strongly advocating something that sounded very much like socialism — a strong Government involvement in industry, and the adoption of policies which would identify the interests of government and industry.

Imagine your columnists surprise when the next day he had to listen to an address by Mr Bill Waters, formerly an economic tutor at Sydney University and now described as a “well-known socialist economist,” who delivered an address which corresponded in all important particulars to that of Mr Henderson.

Of course Mr Waters did not subscribe to the “free enterprise” system; but he did defend manufacturing industry against the precipitate tariff cuts of the Whitlam Government, he did defend the devaluation of the dollar because the revaluations of the Whitlam Government had left our balance of payments in “tatters” (that is to say, foreign exchange reserves of a mere $3 billion), he supported planning, whether indicative or directive … in fact, as far as short term economic policy measures are concerned, he was in total agreement with Mr Henderson.

Of course this was the occasion of a considerable economy of effort for your columnist. He was able to use virtually the identical array of arguments to reply to both Mr Henderson and Mr Waters.

In fact, he was able to point out, the people who say that there is no such thing as a class struggle must be right, since two such apparently different sources of comment could be in almost total agreement.

Therefore, the representative of the Australian Financial Review was able to adopt a consistent line of approach at both conferences, and advocate a point of view which suggested that free enterprise should be really free, free of government assistance as well as government interference.

Free enterprise in this sense involves the assumption, of course, that the earning of profits from productive activity is its own justification, and the arguments about the size of the manufacturing sector, or defence, or self-sufficiency, need justification and if that exists, they should be treated like any other social security payment.

It also assumes that since free enterprise involves the unfettered competition between different enterprises, which should have equal opportunity of access to markets, that there should be an effective and strong Trade Practices Act, which make it a punishable offence for socialist-minded enterprises to interfere with the proper working of the capitalist system.

It assumes that the exchange rate of the Australian dollar should be determined by the supply of an demand for Australian currency, that is, by our total balance of payments situation — that is, that our exchange rate should be set not in order to give social security payments to farmers, miners, and exporters of manufactures, but in terms of their competitivity in international markets.

It assumes that wage rates should be set by collective bargaining between employers and their employees, whether individually or grouped, irrespective of the socialist peace-makers and the sweet-heart agreements which depend upon the limitation of competition in product markets.

It assumes that no sector of the money or capital markets should be subsidised, whether by tax concessions or any other means, and that interest rates should be allowed to rise until they exceed by several percentage points at least the developing rate of inflation of over 20 per cent.

It assumes that property companies which have developed huge tracts of land and acquired huge assets which are posited on much lower rates of interest should be allowed to collapse when land booms collapse, without assistance and without any help for the investors in them.

It assumes that, in similar terms, when the stock exchange crashes, and brokers and investors alike are wiped out, that the Government should not intervene.

But of course there are few advocates of “free enterprise” who really support it. What they are in fact arguing about is how much government cossetting and assistance they should receive when their own follies and inefficiencies have led them into difficulty.

The Whitlam Government has, however, been perhaps more than justifiably naïve in its belief in the strength of the free enterprise system, or the usefulness and relevance of market mechanisms.

For if you listen to what our captains of industry have to say, what actually lies behind their rhetoric, you will find that they are all socialists now.

***
3.
P. P. McGuinness, “The cry of the hip-pocket nerve,”
The National Times, June 30-July 5, 1975, pp. 47, 51.

It is a well-known fact that the most sensitive nerve in the human body is the hip-pocket nerve, and once you touch this, rational thought processes tend to cease, while rational comment on any matter of public interest will be drowned out by the scream of pain and protest.

This is especially the case when taxation concessions, import tariffs, subsidies or other forms of Government largesse to a particular industry or interest group are concerned.

It is simply the case that it is a relatively painless operation to take one cent each away from a thousand people, and give $10 by way of tax deduction or whatever to a single much-richer person. There will be little protest, and some rather ungracious thanks.

But the reverse operation means that abuse will be heaped upon the Government by the single loser, and the gainer will probably not even notice that they have gained, or if they do will not think this a reason to enter public debate to defend the redistribution.

This kind of phenomenon has been frequently noticeable in Australia in recent years as the Whitlam Government has made sporadic attempts to clean up the Augean stables of complex forms of industry assistance that had grown up over the post-war period (the Liberal-Country Party Government was not alone to blame); assistance that had in many cases become obsolete and unnecessary, as well as being in many cases a subsidy by taxpayers as a whole to privileged or high-income groups.

Since many forms of assistance, notably direct subsidies and bounties, and tax concessions, amount to net additions to Government spending, which has to be financed by the rest of the community, it is sensible to consider how many of them are justified or necessary.

This is what the Government set up a Task Force, headed by Dr H. C. Coombs, to do.

The Task Force was announced by the Prime Minister on April 3, 1973.

As well as Dr Coombs the membership comprised Mr M. A. Besley, First Assistant Secretary, Department of External Territories (now with Treasury), Dr S. F. Harris, Deputy Secretary, Department of Overseas Trade (now Professor of Resource Economics at the ANU), Mr R. D. Phillips, Deputy Director-General, Department of Civil Aviation (now special adviser to the Premier of Tasmania on transport coordination), Mr J. J. Spigelman, senior adviser to the Prime Minister (now Secretary, Department of the Media), Mr John Stone, Deputy Secretary (Economic), Department of Treasury, and P. P. McGuinness, senior adviser to the Minister for Social Security (now Economics Editor, The Australian Financial Review).

So it was not just a tea-party.

The Task Force report was submitted to the Prime Minister on June 24, and contained an astonishing list of spending commitments entered into by previous Governments which the Task Force felt were no longer justified, in that the reasons for their introduction no longer were valid, or they had achieved their purposes.

Inevitably this involved treading on a lot of toes, and the outcry was predictable. Every lobbyist, every industry group, every interest group affected, swung into action.

They were not going to have their subsidies or tax concessions removed, no matter what the public interest. It was a bonanza for the lobbyists, which is still paying off.

The removal of a concessional allowance on beer excise introduced when wooden kegs permitted a higher rate of evaporation was called a savage increase in excise, rather than a removal of an unintended reduction in excise when steel kegs became the norm.

The recommendation that the superphosphate bounty, whatever its original justification, was no longer necessary (farmers had been effectively educated in its use) caused an outcry. The Industries Assistance Commission has just produced a draft report which backs up the Coombs Task Force judgment.

There were many other recommendations, which provoked howls from the dairy industry, the life insurance industry, the mining industry, the aviation industry, and so on.

So many lurks and perks were touched upon that the report proved to be a far more successful piece of stirring than Dr Coombs dreamed of, for it is true that he, as a dedicated public servant, did not dream that such a storm of abuse could be provoked by a conscientious attempt to review the justification for some types of public spending, especially when the abuse came from those elements in the community who normally condemn Government spending.

(Incidentally, the Treasurer, Mr Hayden, will have to expect a similar reaction to his Budget in August, if it is as tough as it needs to be; it is only necessary to recall the obloquy heaped upon Sir Arthur Fadden — easily the best Treasurer of the whole period of the L-CP Coalition Government — for the “horror” Budget of 1951.)

There is an excellent current case history of this type of reaction being played out at the moment in the pages of The Australian Financial Review.

This involves a recommendation in the Coombs Report that a concession granted to wine and brandy makers in 1953, allowing them to value their stocks for taxation purposes at fictitiously low levels, should be withdrawn.

Since other manufacturers have to pay tax on the increase in the value of their stocks, this concession meant that the wine and brandy makers had their tax deferred until stock was actually sold, in effect a loan from Consolidation Revenue upon which no interest was paid.

The Coombs Report recommended that this loan should be repaid (it was equivalent to about $15 million in 1973-74) — and, by implication, that thereafter producers should wholly finance themselves their holding of stock.

Predictably, the wine and brandy producers objected, claiming that removal of the subsidy would do irreparable damage to their industry, to the grape growers, and to wine drinkers.

They lobbied hard, particularly by making representations to the then Treasurer, and they worked hard upon ALP members of Parliament from South Australia.

But one thing they did not do was produce a coherent economic justification for their position. So when the Government decided to go ahead with the repeal of the concession, which becomes effective in the tax year just ending, the industry was feeling very unhappy.

So, as part of my work for the Financial Review, I took a look at the arguments available, and wrote an article on June 24 on the subject.

The result was the commencement of a stream of letters, which still continues, all denouncing the article, the Coombs Report, the Government and myself personally — but so far very little real economic (or social) argument has been produced.

The controversy continues this week in the Financial Review, and it is better to leave the details there.

(However, two points could be made here. First, I was accused of not disclosing my membership of the Task Force. Since I in the course of my work make innumerable allusions to the Report, to boast of my membership on each occasion would be absurd. Second, as a result of haste to meet a deadline I left a silly mistake about the cost of the concession, which in no way affects the overall argument, uncorrected. There was no such mistake in the Report.)

But it gives a perfect example of the difficulties of undertaking any rational discussion of an industry’s case for assistance, when that industry is defending a privilege which it enjoys at the expense of the rest of the community.

***
4.
P. P. McGuinness, “The socialists always win,”
The Australian Financial Review, December 2, 1975, pp. 3, 6.

When Milton Friedman, the American economist, visited Australia earlier this year his views on a variety of subjects were widely reported but little attention was given to his views on Australian political parties.

In particular the view he expressed, mainly in private discussions, that all the major political parties had socialist policies, and that the Liberal Party was but a pale reflection of the Labor Party, went almost unnoticed.

Such a proposition would, of course, be bitterly denied by both parties and by the business community.

But, as the coalition parties set about spelling out their economic policies it is becoming perfectly clear that, in Friedman’s terms, they are indeed socialist, that is, committed to massively interventionist policies with respect to business which act so as to increase the scope and depth of government influence over the economic system rather than reducing it.

There were signs that significant elements of the Liberal Party, particularly among those professional economists who are committed to liberalism, were, over recent years, moving towards a position which would be a genuine alternative to the policies of the Labor Party.

Thus both Mr Lynch and Mr Snedden when he was party leader were clearly swayed by the monetarist position, which emphasises the undesirability of too active government intervention by way of fiscal policy as well as favouring a reining in of public sector growth.

And, most importantly, the orientation towards the free market, which is the touchstone of the Friedman position, was attractive to the unofficial Liberal Party thinktanks from which much of the impetus towards new policy was coming.

This point of view saw a free market capitalist economy as being not only efficient and conducive to rapid economic growth but also as being a necessary condition of real political liberty and social equity.

Only by the free play of competitive market forces, with the minimum of interference by government, could the optimum benefits of a capitalist economy be realised.

It would now seem, however, that the kind of policy advice which emanated from the experts in the thinktanks has had very little effective impact upon the thinking of the Liberal Party; to all intents and purposes these advisors have been dumped and their role relegated to that of the research assistants who products facts and arguments to order.

Thus, while there are echoes of the market economists’ position with respect to restraint on growth of the money supply, some kind of minimum income guarantee (for all who want to work) and continuation of restrictive trade practices legislation, Mr Fraser, and even more Mr Anthony, have continued the traditional commitment to direct assistance to particular industries, which is utterly at variance with the proper operation of a freely competitive market economy.

The crudest version of the anti-market Liberal position was expressed on November 28 by Senator Cotton, Minister-designate for Manufacturing Industry, when, announcing the coalition’s policy on manufacturing and industrial development, he committed it to setting up a council of manufacturing industry (rather like that advocated in the Jackson report), higher tariffs, import restrictions, bounties and export incentives.

He did not commit it to a fixed and undervalued exchange rate, to be achieved by a devaluation in the near future, but this is clearly on the cards.

What a contrast to Mr Lynch’s support, not so long ago, for a flexible exchange rate system!

To such commitments there must be added Mr Anthony’s support for the restoration of many of the market distorting subsidies and bounties, his support for a continuation of the network of monopolistic marketing schemes administered by various boards and corporations on behalf of rural industry, and his support for incentives to the mining and oil industries which would give them advantages additional to those they would enjoy under a free market system.

All these are, of course, being advocated in the name of restoration of business confidence. There are good arguments for offering concessions to capital generally to restore confidence and encourage new investment — investment allowances, taxation deferments and proposals for company tax indexation (whatever their practical problems) all have a role in this.

But does business confidence in a capitalist economy, especially under a government which, like the coalition, is pledged to the defence of capitalism, really require the indiscriminate collection of ad hoc hand-outs which is being proposed?

Such hand-outs will only increase the interest of individual firms and industries in moving closer and closer to government, seeking an identity of purpose with bureaucrats and using special relationships with government as a weapon to be used against other less fortunate but possibly more efficient firms.

The habitual bailing out of industries which are in difficulties must operate, too, to diminish the main sanction upon inefficiency imposed in the context of a market economy — that is, the possibility of loss.

Profit is not and should not be a dirty word, but it must inevitably become so if it is not earned in the market in the course of competitive enterprise and risk bearing but instead is guaranteed by government.

It might not appear surprising, therefore, that the strongest supporters of capitalism as an economic system are to be found among those who defend the free play of the price mechanism in competitive markets and are strongly opposed to interventionist policies and direct government involvement in and support of private enterprise, whether by way of tariffs or any other such measure.

But it is a little more surprising to observe the enthusiasm with which the strongest representatives of free enterprise, as the economic system we have in Australia is laughingly described, enter into alliance with socialist economists who denounce the market mechanism and who do not believe that the operation of the price mechanism is in any way conducive to more efficient operation of the economic system.

It is not so long ago that, of all Labor Party politicians, the avowed socialist Dr Cairns was the darling of the manufacturing industry lobbies; and before us at present we have the Jackson Committee report drafted by a committee consisting of representatives of giant corporations with a definite stake in government policy, the head of the Department of Manufacturing Industry, the president of the ALP and of the ACTU and two socialist economists.

Not a single committed free enterprise economist has spoken up in favour of the Jackson report, not a single supporter of free market capitalism has seen fit to defend it.

But the report has been endorsed by Mr Whitlam, by the Association Chambers of Manufactures of Australia and, in part, by the Liberal Party.

In Australia, to adapt an old anarchist saw, it does not matter who you vote for — a socialist always gets in.

***
5.
P. P. McGuinness, “How to influence the new Government,”
The Australian Financial Review, December 16, 1975, pp. 3, 10.

Now that a Liberal-NCP Government has been elected with a huge majority, it would be a pity if the business community were to decide that its problems are all solved, or on the way to solution, and that it is now time to relax from the political preoccupation of the last three years.

For the problems of communication with Government will have been by no means solved (as the proponents of the Jackson Committee report are well aware), nor will the preponderance of the Canberra bureaucracy in the formulation of economic policy have been affected.

Even the Jackson Committee proposals do not involve any real change in this situation, since they conceive of the network of industry councils being served by a Bureau of Manufacturing Studies, within the Department of Manufacturing Industry in Canberra, and of the co-ordination of manufacturing industry policy with policies for other sectors being effected by the Department of the Special Minister of State (or whatever the department which takes over the rag-bag function of DOSMOS under the new Government), also in Canberra.

So this really offers no alternative source of expert policy formulation as distinct from representation of manufacturing interests through the industry councils.

And in many respects the huge majority of the Government is going to complicate the problem of communication between industry and Government, since there will be a large number of Liberal and NCP MPs running around and tripping over each other trying to play a part in this process — for many of them feel quite strongly about it.

It might, therefore, be an opportune moment for a number of the major business groups and Government backbenchers to begin taking active steps towards the creation of alternative sources of policy advice and research which will improve the position of business in the process of policy debate, and at the same time contribute to understanding between business and parliamentarians.

The funding of one or two new “thinktank” organisations more or less closely allied to the Government parties could be a major contribution to this. Such an organisations exists, loosely attached to the Conservative Party in Britain, in the form of the Centre for Policy Studies set up by Sir Keith Joseph.

This body is sufficiently free of the Conservative Party central office to be more than a propaganda body tied to the day-to-day political struggle, but it has formed a significant way of bringing together business, politicians and sympathetic academics who have contributed much to the reformulation of Conservative Party thinking.

A longer established body is the Institute of Economic Affairs, which though broadly sympathetic to it is not dominated by the Conservative Party; this body has for year carried out a major role in propaganda for free enterprise and the market economy, again bringing together economists from business, the academy and politicians of all parties.

Similar organisations exist in the United States and Canada, which like these are devoted to increasing politicians’ and academics’ understanding of business, and vice versa.

That there is a need for this was highlighted in the report of the Task Force headed by Professor Stuart Harris of the Australian National University, set up by the Royal Commission on Government Administration, which reported recently on “The Processes of Economic Policy Making in Australia.”

One of the problems pointed to in this report was that, in effect, too often the representatives of business and government are arguing at cross purposes — business puts of lobbyists to argue against economists, rather than economists who can deal with the arguments being put forward by the rather academic bureaucrats. This is a defect for which business has largely itself to blame.

For there is no shortage of economists employed in business, particularly by the larger companies, and of course there are large numbers of other staff with some training in economics and related subjects. Unfortunately this large and potentially very influential group of the economics profession is for the greater part silent, and contributes little to the understanding of how business works.

Partly this is because the few concerned academics have in the past been allowed to dominate the discussion and analysis of economic policy-making by default, and their assumptions have been accepted or rejected without sufficient controversy.

It has also allowed much of the work of the universities to become increasingly esoteric and university economists’ attitudes to practical policy arrogantly superior.

(Like the econometricians of the Australian National University who spend a good deal of their time telling their students what is wrong with the Treasury-Australian Bureau of Statistics and the Reserve Bank econometric models, without trying to produce a better alternative for practical forecasting and analytical purposes.)

As a corrective to this divergence between academic economics and practical economic policy problems, both on an economy-wide and on an industry basis, more needs to be heard from the economists employed in the private sector.

One useful first step towards this would be the foundation of a society of business economists, concerned with the discussion of the economic problems of the private sector and its relations with Government at all levels. Such a society could well work in with the kind of research institute suggested earlier.

Initiatives such as these would require funding, and on a fairly generous basis, by private companies. There would be direct benefits to them, in terms of improvement in performance and enthusiasm of their own economists through greater stimulus from contact with others in similar lines, and with the younger politicians who will be seeking such contact.

The indirect benefit would, however, be much greater, through ultimately, a reorientation of the economics profession away from its present rather precious and non-understanding attitude to the actual problems and operation of the private sector. And, of course, a Government can much better be influenced by well-thought-out policy proposals than by any amount of political donations.

***
6.
P. P. McGuinness, “Too much protection can lead to a nation of cripples,” The National Times, October 24-29, 1977, p. 54.

Among the many widely believed pieces of mythology about the Australian economy, such as that it is possible to return to full employment without a temporary cut in real wages, is the notion that unemployment can be cured by raising tariffs or imposing restrictions on imports.

This is clearly believed to be the case by the Prime Minister, as well as most employers and unions in manufacturing industry. It is a piece of popular wisdom which has a very long, but not particularly respectable, history; since the effects of competition from imports on an industry can be observed directly, whereas the effects of tariffs on the economy as a whole are extremely difficult to analyse and therefore to demonstrate.

If it is not the case that increased protection leads to a lower rate of unemployment, but instead leads to higher unemployment, then it follows that the main argument in favour of the tariff and import quotas must be invalidated. Other, and more effective, means of curing unemployment would then have to be sought.

This is the line of attack which is now being taken by the Industries Assistance Commission, and it is a much stronger basis for a case against the Government’s protectionist policies than the older line of argument in terms of economic efficiency.

The efficiency argument against the tariff has always suffered both from the fact that it is difficult to understand without training in economics, and that in itself it is not a terribly strong argument.

The gains in national product from moving to full employment behind a high tariff barrier and full employment under free trade have been estimated at around 3 per cent of GDP. Clearly this gain would be more than offset if the actual situation were one of high unemployment, and employment (and hence output) could be raised by moving towards a more protectionist position.

But if it can be shown that increased protection for manufacturing in fact causes a rise in unemployment, then the case against protection would become very much stronger.

It may, of course, be the case that a high level of protection in one industry, say clothing, could increase, or maintain, employment in that industry — but at the same time lead to higher unemployment in other industries, as a result of increases in their costs.

A recent example of this kind of situation was presented in a very clear form by the decision to increase tariffs on radial tyres, which flowed directly from an earlier decision to increase the tariff on tyre cord. This is a common phenomenon, but the effect is rarely so clear — and hence many Australian industries suffer from the imposition of tariffs.

That protection is not always successful in maintaining employment even in those industries which have enjoyed high and rising levels of protection is demonstrated by the fact that despite import quotas and tariffs conceded to the clothing industry as a result of a particularly noisy campaign and threats of mass sackings if protection was not given, employment in that industry has in fact decreased.

In fact, as the report of the Industries Assistance Commission indicates, what has happened in the clothing and footwear industries is that, as a result of higher tariff protection, profits and labour-saving capital investment have increased more than in other manufacturing industries, while employment has declined faster.

Thus while the average rate of effective assistance in the clothing and footwear industries was 71 per cent, as against an average rate for all manufacturing industries of 28 per cent (and it has increased since then) the average annual rate of change of employment in those industries in the years 1973-74 to 1975-76 was minus 9.5 per cent, as against a fall in manufacturing industry employment as a whole of 4.5 per cent a year.

In the 1975-76, a year of rising protection for clothing and footwear, the profitability of manufacturing industry (ratio of operating profits to funds employed) was, on average, 13.1 per cent. However, in the suffering area of knitting mills and clothing, the rate of profit was 22 per cent, and in footwear 23.4 per cent.

To put it bluntly, those unions who have supported the claims of the clothing and footwear industries for higher protection in the belief that it will preserve employment are being taken for a ride.

And, in the process, they are taking the rest of the workforce on that ride.

The IAC estimates that the quantitative restrictions on clothing and footwear imports “have led directly to the Consumer Price Index being approximately 2 per cent higher than it would have been in their absence.”

Given the draconian measures which the present Government has taken to cut inflation by depressing the level of economic activity and employment, those extra 2 percentage points have been the equivalent of thousands of people put out of work.

That is to say, the massive assistance to the clothing and footwear industries has, first of all, not prevented unemployment in those industries rising faster than in manufacturing as a whole, and, second, has necessitated more restrictive monetary and fiscal policies, and hence higher unemployment throughout the economy, than would otherwise have been required.

Part of the problem of the deleterious effects of protection policies in manufacturing industry has come from the fact that there is no sense of logic in the way in which they are applied. It does not make sense for a country to decide, if it wants to, that say 22 per cent of the workforce (the actual present proportion) should be in the manufacturing sector.

Such a goal could be achieved by setting a standard rate of effective protection, without discriminating between manufacturing industries.

But Australia has as a result of historical traumas (including the still active drive to prepare for the Second World War) insisted on protecting industries regardless of the efficiency, necessity, or cost of protecting them.

The result has been a low standard of living, slow economic growth, and heavy cost burdens on the rest of the economy. In the current recession it has meant that unemployment has risen to the highest level since the Great Depression.

The long-term implications of insisting on giving high levels of protection to our most economically (and, sad to say, often at the same time managerially) inefficient industries must be to cripple Australian manufacturing industry as a whole, and impose chronic unemployment. That is unhappily the real contribution of protection of certain industries to the Australian economy.

***
7.
P. P. McGuinness, “Tariffs: A case study in academic failure,”
The Australian Financial Review, September 5, 1978, p. 4.

Protection policy in Australia over the last 10 years provides a depressing record of sterile controversy and increasing divergence between actual levels of industry protection and the arguments of economists against protection.

And despite the creation of the Industries Assistance Commission to replace the old Tariff Board, with wider scope of operation, there has if anything been a greater degree of arbitrariness in the past four years than in the rest of the previous decade in the determination of actual measures of protection without public justification of the decisions actually taken.

A recent survey of protection policy by Dr Peter Lloyd of the Australian National University (published as chapter 5 of the newly published Surveys of Australian Economics) points to the “generally sophisticated level of debate” in Australia on protection policy, but notes that “the very high differentiation of the structure of assistance in Australia relative to other developed countries has continued … Clever analysis is not sufficient for sound policies (is it even a necessary condition?).”

This is a fairly typical conclusion on protection policy in Australia, and a pessimistic one. It seems to imply that there is little connection between public discussion and government policy making, the latter being chiefly the outcome of behind the scenes pork-barrel politics.

It has some truth in it, but conspiracy theories, while popular, are notoriously bad at explaining what actually happens.

It is therefore useful to consider Dr Lloyd’s paper as an aspect of the pathology of protection policy making in Australia (and of economic policy making generally).

Its excellence cannot be discounted as a survey of the academic arguments on the subject and the developments which are there referred to as “theoretical advances.”

But, like the other surveys in the volume (Surveys of Australian Economics, edited by F. H. Gruen, published by Allen and Unwin, $9.95 paperback), it reflects the greatest weakness of academic economics in Australia as well as its strengths, namely the inability of the academics to carry on any kind of dialogue with anybody but themselves.

Lloyd is the least culpable of the offenders in the volume, yet the debate to which he refers has taken place mainly in the pages of recondite journals of tiny circulation, in which the tiny brand of academic economists talk to each other, usually in hieroglyphics.

One would not really think from this cosy little circle’s exchange of articles and notes, contributions to academic conferences conducted at great public expense, and so on, that protection policy is a very live political issue about which there is a continuing and wide ranging debate, for the most part anything but sophisticated.

The Industries Assistance Commission reports are referred to, and a couple of Australian Industries Development Association publications get a mention.

But where are the views of particular industries, of individual firms, of trade unions, and even of the bureaucrats and politicians surveyed? Where is the attempt to analyse what they say and its relevance to protection policy?

The answer is, nowhere. Anything outside the academic journals is for the most part tacitly dismissed as not being part of Australian economics.

No doubt we will have to wait for the next century for an historian to describe what is really going on in the debate on economic policy today.

As usually happens in the perspective of history most of the academic scribblers will sink into obscurity, while those who formulate the really influential policy views, whether they be politicians, captains of industry or unionists, will gain in stature.

The real question to ask is why the economists do not exercise more influence upon the policy makers, and whether what influence they do exercise is for good or evil.

Part of the answer lies in the naïve belief of the academics that they have no serious duty of communication, no obligation to develop policy relevant economics.

There are exceptions to this, but only a very few who are consistently thinking about the connection between economic theory, economic analysis and economic policy in a way which is comprehensible or useful.

Protection policy has probably produced most of these, but even taking account of names such as Corden, Gruen, Lloyd himself, the econometricians of the IMPACT project, and above all Alf Rattigan, it is a pathetically brief roll call. And Rattigan, of course, is not an academic but a bureaucratic politician.

The history of the protection policy in the past 15 years, if ever it comes to be written, will be a fascinating story, and the various inputs into the policy making process will be one of the most important facets of the story.

But the role of the economists will be a trivial one. Lloyd’s survey makes it only too clear why this is so.

Of the 47 pages of the survey only seven deal with what is actually known about the costs, benefits and economic impact of protection. Some of this is purely descriptive, referring to the range and dispersion of tariff levels and the declining trend of effective and nominal rates. The growth of quantitative restrictions is in recent times offsetting this.

But on the central issue of the costs of protection little is known. There is some work (some of it very advanced and sophisticated, but correspondingly tenuous) which suggests that in static, resource allocation terms the loss of real output as a result of protection might be only 2 per cent or 3 per cent of aggregate consumption per year, or even less. While this amounts to a lot over a run of years it is hardly a serious short term problem.

This result has been seized upon by the small number of defenders of high protection who take any notice at all of the academics to justify protection.

The costs of adjustment, they say, are high, losses to consumption as a result of employment effects of reducing tariffs would be greater and there therefore is no need to reduce protection.

The response of the economists to this has been lame indeed. There have been attempts to emphasise the “dynamic” effects of a move toward freer trade, for example by the stimulus it would provide to competition and business efficiency.

But business efficiency in theoretical economics goes under the absurd name of “X-efficiency,” which they do not talk much about; while the word efficiency is used in a very special sense, to refer to “Pareto-optimal” allocative effects.

A good example of how the economists do more harm than good in their theoretical “sophistication” is the notion of tariff compensation, which has been taken up on all sides as a slogan justifying more protection for just about every industry except the few already at the top of the protection heap.

This is based on what is known as the “theory of second best,” which boils down to the proposition that, if in a real situation there are lots of different tariffs, subsidies and other distortions, the removal of a single one of them may instead of moving the economy towards the allocative efficiency optimum (“first best”) move it way. And it may be that the addition of another distortion would make things better overall.

This is an interesting theoretical curiosum of no significance whatsoever, since there is no way of knowing whether it is ever true. As Lloyd says, ever so politely, “computing second best market interventions is informationally very demanding.”

Yet, on this absurdly inadequate basis, the notion of tariff compensation has gained wide currency and has cropped up in the Green Paper on rural policy, in some Industries Assistance Commission reports and naturally enough in the submissions of every rural interest from the wheat farmers to the white mice marketing board.

There is much in Lloyd’s survey which is of value. It provides the best overview of the academic discussions since Corden’s survey Australian Economic Policy Discussion (1968). It will be absolutely essential as a reference for students, and indeed anyone interested in the economic, as distinct from the political, arguments for and against protection.

But it is most valuable for the way in which it documents the failures of the professional economists.

***
8.
Padraic P. McGuinness, “Caught between a frock and a harsh, post-modern place,” The Sydney Morning Herald, March 26, 1998, p. 19.

Women do have a harder row to hoe in politics than men and, to a very large extent, this is not because of men’s attitudes to women but because other women judge them harshly, either by feminine or feminist standards. Cheryl Kernot’s real problem is other women, and the fact that she is not allowed to be judged as an individual.

It is difficult to think of the normal readers of Australian Women’s Weekly finding the slightest thing amiss with a high-profile woman dressing up in red ballgown and expensive jewellery, just as they all would like to do on special occasions. That is why wedding dress is still so popular. The important thing is that the dress actually enhances the wearer’s looks, presence and dignity. The fact that the dress itself is elaborate and ornamental hardly matters. On this count, Kernot, as a good-looking mature woman, is beyond criticism. She is, after all, a woman — and both men and women in our society expect women to dress ornamentally or elegantly on special occasions, provided it suits them.

The same is true of men. While it is only in certain areas of the city that one expects to find men wearing dresses or frilly costumes, restrained elegance and occasional flamboyance have always been acceptable among males. Former Prime Minister Keating and his expensive Italian Zegna suits expressed one form of this; the judges and barristers in procession or in full display, the bishops and priests of many churches, express another form — indeed, many cardinals when in full fig look a lot more showy than Ms Kernot in her red dress and feather boa.

It is only when fancy dress becomes undignified that it is a danger — and then, strangely enough, it is Coalition politicians who are usually the butt of ridicule. Bronwyn Bishop would have done better not to wear footy gear; Alexander Downer should have known he would never live down the fishnet stockings and high heels.

But it is the feminists who have rounded on Cheryl. Somehow she has let the side down by dressing up as the vast majority of Women’s Weekly readers would like to do for a special occasion. And we all thought that the era of the boiler-suit brigade was over.

She has shown, horror of horrors, that she is feminine. On the other hand, Women’s Weekly readers are likely to be intolerant of female politicians who come across as blue-stockings or dreaded social workers. So a woman politician has special problems, since she will be always steering between the Scylla or feminism and the Charybdis of femininity, and both are female hazards.

There are, it is true, still plenty of males who believe that women have no place in politics or can be ridiculed on account of their physical appearance (if large or fat) or familial obligations. Again, strangely enough, only when such ridicule is directed at Coalition women is it allowed to pass unremarked in refined circles. In all such cases, the real issue is the insistence on judging people, and especially women, in terms of their group identity. A person is a person, whether male, female, black or gender-confused. But such freedom from stereotyping, once considered the essence of any civilised conception of equality, is now under attack even from its beneficiaries.

This has been a developing theme among the “post-modernist” writers on feminist legal theory, on human rights and on group rights for racial or ethnic groups. The traditional liberal democratic view of equality between men and women, whites and blacks, Jews and gentiles, straights and gays is that each person should be considered to have rights independent of group identity, and that there is a fundamental universal equality before the law attaching to each individual regardless of group identity. The law should be blind to gender and race when it comes to basic political rights and liberties. Social democrats of various hues have long recognised that this is not enough, and that help should be extended to the disadvantaged and the victims of inequality; political rights alone are not sufficient.

One of the reasons why post-modernism has obtained such an unenviable reputation outside the sheltered workshops of the universities is the extreme obscurity and meaninglessness of the jargon employed, such that quite often interpretation of the writings of the great figures in plain English is beyond either teacher or student. But there is good reason for this, for sometimes it is important to obscure just what is being said.

On this page last week, Catharine Lumby made the mistake of trying to present some of this discourse in comprehensible terms as befits a journalist; in doing so she let the dirty little secret of post-modernism out of the closet. This is that it does not believe in universal human rights, nor equality before the law, nor even necessarily the elimination of material inequality. If the do-gooders of post-modernism believe that the proper aim of social policy is the “recognition of special needs” of particular groups, with everyone a special case, then they have abandoned any grounds for opposing racial or sexual discrimination.

We are left then only with lists of preferred groups whose special needs should be addressed, and lists of other groups which can be ignored or against which it is legitimate to discriminate or levy higher taxes and refuse benefits. Who determines who belongs on which list? How do you get off one list and on to another? And in what way does the “privileging” of some groups as against others differ from classical racism or fascism?

***
9. Further reading for Economics.org.au readers

a) The fifth of the eight articles in the above collection could be seen as a direct precursor to and harbinger of Paddy McGuinness’s influential article in the early days of the Centre for Independent Studies: P. P. McGuinness, “Where Friedman is a pinko,” The Australian Financial Review, April 4, 1978, p. 4.

b) On compensation for rather than repeal of government legislation, here are four Modest Member (Bert Kelly) columns: “Will we end up subsidising one another?,” The Australian Financial Review, August 20, 1971, p. 3; “Why take in one another’s washing?,” The Australian Financial Review, January 12, 1973, p. 3; “A cow that sucks itself — that’s us!,” The Australian Financial Review, August 23, 1974, p. 3; and “The rewards for taking in the washing,” The Australian Financial Review, July 25, 1975, p. 3. See also: John Hyde, “Regulation exacts a price,” The Weekend Australian, January 11-12, 1986, p. 27, in particular this passage: “When taxis are deregulated, should today’s taxi owners be compensated for loss of the artificial value of a taxi plate? They will benefit from the deregulation of other industries and the government did not promise to maintain the inefficient discriminatory legislation for ever.”

c) On being a free enterpriser but not in this or that area: Leonard Read’s April 1970 essay, “Sinking in a sea of buts.” There’s also “The Horrible History of Jones,” “the ratchet effect” and the results of starting with a false premise or following from a wrong step. Also, on “Sinking in a sea of buts,” Ron Manners arranged and recorded in 1978 a presentation by Leonard Read on this subject, available at this hyperlink.

d) On the Lib/Lab Coalition: John Singleton, “At last the 1948 show …,” Advertising & Newspaper News, October 31, 1969, p. 4; John Singleton, “Gortlam rides again,” Advertising & Newspaper News, November 27, 1970, p. 4; Mark Tier, “Tweedledum and Tweedledummy,” The Economy Report, October 21, 1974; and John Singleton, “The bold and boring Lib/Lab shuffle,” Nation Review, April 23-29, 1976, p. 681.

e) Earlier in 1972, Bert Kelly described as a motto what Paddy McGuinness separately (as we saw way above) described as a principle: “The fact is, if the Government is supplying money for any particular project, the usual standards of responsibility do not apply. The motto then is let’s get in for our cut.” ~ A Modest Member of Parliament, “The Govt’s helping hand often hurts,” The Australian Financial Review, April 21, 1972, p. 3.

f) There are many other aspects of these McGuinness columns with further readings at Economics.org.au. Just let me know what you’re interested in if you’d like help finding it.