Author: Nicholas Low

Activating Public Planning

Post author By Nicholas Low
Post date 26/05/2021
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Having written Being a Planner in Society and its Companion Website I ask myself, ‘what do I want planning to be’? I have an answer, but it is a question for all readers of the book. If I were still teaching urban and environmental planning, I would put that question to my students. More important than my answer is the debates which I believe should today take place around that kind of questioning. I’m hoping the theoretical exploration in my book may throw some light on the matter.

My answer is that I want planning to become a social movement again, to find again its transformative origins, to invent new ways of designing our human response to the environment for the better, and to re-join social with environmental transformation. All this is in light of the experience of planning in theory and practice that we have gained over the last hundred or so years.

However, to do that, to reinstate planning, that is public planning by the democratic state, we need to understand what has gone wrong with the so-called neoliberal model of governance. As I explain in my book, and further illustrated in the companion website, the balance of power over the detailed making and implementation of policy has been transferred from a competent, professional public service, with clear lines of accountability, depth of expertise and longstanding experience, to a political tier with an intense but shallow focus on the political cycle.

In Australia the unbalanced empowerment of political control has led to a diffusion of accountability in which ‘cabinets’ consisting of most of the senior politicians are put collectively in charge of almost everything important. The drive for privatization has diminished the permanent public service and outsourced many functions which properly belong within government to private firms with no public accountability under contracts, sub-contracts and complex but ineffective regulation.

This process has been going on now at federal and state levels for at least thirty years. Senior economists, political scientists and journalists have complained about it. Thus Laura Tingle in 2015, then political editor of the Australian Financial Review, wrote that ‘we have forgotten how to govern’. John Hewson (economist and former leader of the Liberal Party) writes, ‘The public service has been effectively denuded of essential talent by years of spending cuts and efficiency dividends – many departments are now referred to as gutted shells’. Even the former Labour Treasurer and Prime Minister, Paul Keating, who initially embraced neo-liberalisation on behalf of the Labour Party declared in 2017 that ‘liberal economics has run into a dead end and has had no answer to the contemporary malaise’.

Many people in leadership positions now know that neo-liberalisation has produced a failed system of governance. And it is a governance model created by ideology not an economic model. But because of the path dependence of both institutions and ideas in Australia, nothing is being done to change it. Its failure was on show in July 2020 as the State of Victoria suffered a huge (by Australian standards) second wave of coronavirus.

Through concerted and swift police action to ‘lock down’ the whole country, Australia had been initially successful in containing the spread of the virus, closing all opportunities for people to gather or even leave their homes, with few exceptions. Returning travellers from overseas were forced to isolate in designated hotels for fourteen days. So successful was this ‘suppression’ strategy that when caseloads went right down, governments started to ease the restrictions to get back to something like normality.

However in late June 2020 an outbreak of infections occurred in quarantine hotels in Melbourne. Guards contracted the virus from the confined travellers and, because restrictions on movement and gathering were by then relaxed, the infected guards went home to their families and friends, who became infected in turn. The virus then spread rapidly throughout Melbourne suburbs. The result was a second wave of coronavirus in Australia (with up to 400 cases and three or four deaths per day), centred in Melbourne, much greater than the first wave.

The piecemeal response of the government of Victoria was first to lock down certain postcodes and high-rise public housing blocks where the virus appeared. When that didn’t work to contain the spread, whole municipalities were ordered into lock down, then the whole of metropolitan Melbourne. Now (mid-July) cases are increasing outside the metropolitan region.

It’s easy to blame the Premier of Victoria for this outbreak. But, in an emergency, politicians operate within the established governance model. In keeping with the neoliberal model of outsourcing, contracts were given to private security companies to provide hotel guards. In some cases it appears that these companies further subcontracted the tasks, ending up with virtually untrained and unprotected casual workers in close contact with infected returned travellers.

Casual work has grown from about 13 per cent of the workforce in the 1980s to around 25 per cent in 2020. Casual workers, assumed to be self-employed, now form a permanent, highly exploited, tier of the labour force without the rights accorded to employees. They include aged care workers, Uber drivers, hospital and school cleaners, bar tenders, security guards, abattoir workers and even university staff (averaging 40 per cent of staff). Many have several jobs on the go.

Outsourcing plus casualization of labour is the underlying cause of the outbreak. A government without depth of policy capacity and clear lines of accountability in the public service has proved unable to manage the pandemic, adopting the stop-start approach of suppression rather than elimination, which is both feasible and in the long run less economically damaging. The government has refused to acknowledge the systemic failure, tossing the issue to a public inquiry that will not report until September.

The Covid19 event is an existential crisis. Governments around the world had been warned that a devastating pandemic was likely to occur, just as they have been warned that global heating will have catastrophic consequences. But the absence of public planning for people, planet and places has left citizens at risk of death and disability, and economies in danger of destruction.

Tags crony capitalism, neoliberalism

best practice governance government policy

How Neoliberalism Mutated into Crony Capitalism

Post author By Nicholas Low
Post date 23/05/2021
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CANBERRA, AUSTRALIA - MAR 25, 2016: Interior view of the House of Representatives in Parliament House, Canberra, Australia

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Let’s be clear. Whatever system of economic governance dominates the world today, it is not pure neoliberalism. It is better described as crony capitalism, which is opposed to the agenda of those like Friedrich Hayek who started the neoliberal ball rolling. Neoliberalism has mutated into crony capitalism with devastating results for economic growth and social justice, endangering the health and welfare of entire societies.

Crony capitalism has been around in some form or another since the beginning of capitalism itself. I can’t do better than cite the definition in Wikipedia: ‘an economic system in which businesses thrive not as a result of risk, but rather as a return on money amassed through a nexus between a business class and the political class’.

The evidence of crony capitalism is abundant over the globe, from Trump’s America to Xi Jinping’s China and Bolsonaro’s Brazil. In Australia its resurgence is recorded in a book called Game of Mates, How Favours Bleed the Nation by economists Cameron Murray and Paul Frijters, in Dead Right: How neoliberalism ate itself and what comes next (‘Quarterly Essay’ by Richard Denniss), and in On Fairness by Sally McManus. I provide a few examples in Being a Planner in Society.

Hayek in his book Law, Legislation and Liberty conceived of an economic governance system in which ‘law precedes legislation’. ‘Law’, governing the behaviour of the market economy, would be determined by a legislative assembly consisting of wise elders (over 45 years old) serving electoral terms of fifteen years. Their election would not be subject to universal suffrage, and anyone receiving any benefits from the state (pensions, unemployment benefits, government salaries) would be automatically excluded from voting. Hayek’s plan was to set up a governing authority beyond political control to prevent elected politicians interfering with the market.

This position was later reinforced by the work of Milton Friedman, and the public choice theorists. As I observe in my book, politics, so it is argued by the public choice theorists, is nothing more than a game in which political actors (inside and outside government) maximise their short term advantage through ‘log-rolling’ bargains’. That cynical view became self-fulfilling.

The problem for the neoliberals is that electoral politics refused to go away, for the simple reason that people value universal suffrage that holds governments to account. The political class therefore continued to hold power even while they paid lip service to neoliberalism. The political class, even in manipulated democracies like Russia today, enjoy their power and legitimacy and work hard to maintain it. So the governance system we have today is a hybrid between corporate economic power supported by antidemocratic neoliberal ideology and political power supported by universal suffrage: that is crony capitalism. This result was what Hayek regarded as ‘the worst of both worlds’: political intervention with private corporate production.

Then came a theoretical spawn of neoliberalism called New Public Management. The ideology of NPM can be interpreted in different ways. It provided a salutary critique of sclerotic bureaucracies that had become distanced from the publics they served, hence ‘customer service’ became a byword for NPM but that admirable goal covered something more sinister. The scope and ambition of NPM is breathtaking;

New Public Management (NPM) is part of the managerial revolution that has gone around the world, affecting all countries, though to considerably different degrees. The theory of new public management contains insights from game theory and from the disciplines of law and economics. … The theoretical background of NPM is to be found in the strong criticism of a large public sector, to be found in the public choice school as well as Chicago School Economics, both attacking since the mid-1960s prevailing notions about public sector governance (Lane, 2000: 3).

There is not space here to undertake a critique of NPM (which is, incidentally, a major lacuna in my book). But the introduction by Lane makes clear the link with neoliberal ideology which I do address in the book. The essentials of NPM are these: the use of quasi-market structures for delivery of services, contracting out of government functions to private firms, setting performance targets and continual monitoring of performance, handing over power to senior management executives, replacing trained personnel in professions relevant to the government function (e.g. public health, environmental conservation, city planning, building regulation) with generalists trained in ‘management’. What this management training in fact amounts to is in-depth indoctrination in neoliberal ideology. Some of the Australian environment and planning failures to which I refer in the on-line Appendix can arguably be traced to the replacement of professionals in senior management by generalist managers. Of course the issue is far from simple, but this is a hypothesis that at least deserves to be thoroughly researched.

Hayek’s proposal to suspend universal suffrage, with society run by a largely unaccountable State, which is at the heart of neoliberal doctrine, was dangerous nonsense from the start. But its design to suspend the struggle for equality was adopted by Regan, Thatcher and a multitude of think tanks funded by corporate wealth. Neoliberalism quickly mutated into class warfare with suppression of the trades unions, vilification and abuse of the unemployed, massive cuts to the public service, and transfer of wealth from the poorest to the richest in society. The end result, as we now know, was not long term economic growth but miserly hoarding of wealth piled into tax havens and stock markets: the misereconomy. Crony capitalism is only one short step away from fascism, with populist politicians seizing the moment to limit democratic restraints in order to stay in power. We know where that ends.

The Canadian philosopher John Rawlston Saul saw what was happening twenty years ago. What he called ‘anti-government government’ created a ‘false populist model’. Think of Thatcher’s talk of ‘rolling back the state’, Trump’s talk of ‘draining the swamp’ and, even today’s ‘deep state’ conspiracy theories. Citing Mussolini’s rise to power, Saul remarks, ‘No matter how big and structured the Fascist Party became, it always declared itself to be the voice of anti-party, anti-government politics’.

The examples of crony capitalism in action today come thick and fast in that sector of the daily press that is not devoted to class warfare on behalf of corporate power. Commentators of the independent press in Australia are almost unanimous in ascribing the cause of the second surge in Covid 19 to the impoverishment of the casual workforce, lack of sick leave and poverty-level unemployment relief forcing workers to go on working when they are ill, the privatised system of aged care, and the lack of depth of government response. That is what has now caused 810 deaths and counting, in Victoria, destroyed the health of many survivors, and ruined the economy.

The crony-capitalist governance model as exhibited in Australia, has resulted in corruption of urban and regional planning in which deals are done between developers and governments to enrich the latter at the stroke of a pen. A huge area of Melbourne was converted from industrial to residential zoning without any provision for open space or educational and health services. Companies linked to the government of the day made millions from the increase in land value. Vast road building projects are signed off with private companies to enrich the latter at the expense of the public interest.

Failures of building regulation, outsourced to private firms, have resulted in hundreds of tower blocks being covered in flammable cladding. The weakly regulated private recycling industry has resulted in flammable material stored in huge warehouses, catching fire and belching toxic smoke over residential areas. After much of Beirut was destroyed by an explosion of ammonium nitrate, Australian journalists started nervously looking for stores of this chemical, and found a stockpile in Newcastle, New South Wales, four times the size of the stock in Beirut. Where? Just three kilometres from Newcastle’s CBD.

Hayek wanted to take power away from politicians. Crony capitalism shares power between the political class and the corporate sector. The Australian governance failures that have occurred since the 1990s have many sources: incompetence of a poorly organised and depleted public service, continued class warfare on working people and the unemployed, shameful environmental policy, mental cruelty to refugees, institutional paternalism, sexism and racism. No governance model is mono-causal and ‘pure’. But the current governance model has strayed far from liberalism, whether old or new.

Tags crony capitalism, neoliberalism

best practice governance government policy

More on Governance

TfM has become increasingly concerned about the declining standards of governance at the political and institutional level within all levels of government. As noted in an earlier blog, poor governance is the main reason we have consistently achieved poor transport outcomes in Melbourne and Victoria generally but it is a complex issue with no simple solutions. Many of the problems have their roots in political thinking/dogma which can be very difficult to change. Three papers will be included in our blog over the next week by President Nick Low to provide a better understanding of this issue. These include: The Dysfunction of ‘New Public Management’, a lesson from Covid 19, How neoliberalism mutated into crony capitalism andActivating Public Planning. The first of these is included in this blog.

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The global experience of planning the response to the Covid 19 pandemic has revealed many failures of governance across the nations, both failures of political leadership and failures of the neo-liberal institutional models that govern policy making in the 21st Century.

The death of neo-liberal economics occurred in 2008 with the GFC. But its zombie-like ghost remained to haunt governance. The post-mortem has only just begun – most recently with the work of Kay and King (2020) – though the sickness was foreshadowed much earlier. The work of forensic examination of the corpse must continue to identify specifics of ‘organ failure’. In what follows I examine one such failure.

New Public Management

The particular neo-liberal organ of governance I examine is called ‘New Public Management’ (NPM). NPM is a theory of public sector management whose assumptions are built on the axioms of the Chicago school concerning human behaviour and its motivation. These axioms of ‘rationality’ are critically discussed at length by Kay and King (2020, e.g. p. 110 et seq. ‘The triumph of the American school’). The central axiom of the ‘American school’ is that individuals always seek to maximise their own ‘utility’. Further, the benign social outcome of utility-maximising individuals is only achieved through the free market. The precise connection between NPM and the Chicago School is too complex to address here. But it is important to note one observation of Kay and King which is relevant to what follows. The authors say, ‘Our brains are not built like computers but as adaptive mechanisms for making connections and recognising patterns. Good decisions often result from leaps of the imagination.’ (ibid: 47). With NPM there was a failure to imagine what is needed to protect the population of the State of Victoria, Australia, from the spread of the virus from returning travellers.

The central assumptions of NPM are as follows.

Professional experts in fields relevant to public policy are self-interested in promoting policies and understandings of the world that emerge from their professions. Professions are viewed as organised institutions promoting their own self-interest. Thus professional personnel are biased in favour of policy priorities that support their employment and remuneration. Fields of policy can thus become ‘captured’ by professional interests. (Somehow the economics profession has exempted itself from any implication of policy ‘capture’). Instead, people trained in ‘management’ replace professionals in senior executive positions in the public service. Their function is to ‘manage’ what political leaders decide, mostly meaning managing contracts with private sector agents.

There is scepticism about any value of ‘the public interest’ other than is demonstrated by market outcomes. Thus, the proposition that a profession might, at least in some important respects, represent the public interest in any particular field is discounted.
Only political leaders competing in electoral arenas are capable of devising policies in the public interest. Competition for votes becomes a kind of substitute for competition for customers. Policy making is thus seen as a top-down process, in which policies and their implementation are radically separated. In the words of Jan- Erik Lane (2000: 179), ‘In public policy, the policies government decides centrally are to be implemented either by means of central bureaux steering public employees at lower levels or through wide discretion on the part of policy networks’. Presumably the networks involve public and private sector actors.

These assumptions are simplistic and ideological. They have no basis in scientific observation of human behaviour. They justify the neoliberal programme of deregulation and reduction of the size of the public sector, in short, the hollowing out of the state. They support the desire of the economics profession to reduce economics to mathematical algorithms in order to make it look scientific and politically neutral.

The consequence for public sector management drawn from these assumptions is that the public sector should be structured with three elements: political leaders who decide policies, consultants (typically private sector) who advise political leaders, and managers who implement contracts to embody policies. In what follows I trace the unforeseen consequences of the NPM approach in the public health arena which resulted in a catastrophic failure of planning.

The outbreak of the Covid 19 virus in the State of Victoria, Australia, in 2020

After quite successfully containing the spread of the virus in a ‘first wave’ from March 2020, a second wave of infections hit the State of Victoria in July 2020. 768 people died from this second wave.1 The long term health of many more has been affected. The State was forced into ‘Stage 4’ lockdown which included a curfew between 8.00pm and 5.00am, enforced closure of many businesses, bans on movement beyond five kilometres from home, and compulsory wearing of face masks. The lockdown was enforced for more than three months.

It was established by genomic tracing that all of the second wave of infection originated from two quarantine hotels in which returning travellers were forcibly sequestrated. The virus was spread by hotel security guards who were insufficiently protected from the virus. Businesses suffered and the whole Australian economy was shocked. Political leaders such as Daniel Andrews (Premier of the State of Victoria) must of course accept ultimate responsibility for such a failure, as he has. He quickly announced a public inquiry into the outbreak. The head of the inquiry, Justice Jennifer Coate, reported in November 2020. No individual was found to be responsible. But the root cause lies deeper in the lack of effective planning conducted by Victoria’s public health administration.

In recent years planning for infection control from all sources began with the report by Dr Rosemary Lester published in 2014. Lester is a highly qualified expert in public health and epidemiology. Her report was delivered to the emergency management authority (Emergency Management Victoria). The epidemiological expertise shines through the report. Lester recommended the use of personal protective equipment and training in its use ‘in all health care settings’. Her report was shelved.

Under the name of the Minister for Health, a second planning report was published in March 2020 authored by senior public servants of the Victorian Department of Health and Human Services (DHHS). These public servants had no public health or epidemiological background. Their report showed no awareness that the people looking after those quarantined in hotels needed to be equipped as health workers, with appropriate training and personal protective equipment. The report is a managerial document focusing mainly on the (then) three stages of governmental response. It draws heavily on a similarly managerial report from the Federal Department of Health.

In June 2020 an ‘operation’ was devised by DHHS named ‘Soteria’ (after the Greek goddess of rescue). This operation was designed to manage quarantine of returned overseas travellers. The DHHS displayed nothing on its website about the operation, about who devised it or what its aims were. At the public inquiry headed by Justice Coate a sheet ofinstructions to ‘hotel security staff’ emerged: ‘OPERATION SOTERIA, PPE Advice to Hotel Security Staff and AO’s (sic) in Contact with Quarantined Individuals’. It advised that personal protective equipment was not required to be worn by security staff at any point of contact. The latter include the hotel lobby, the quarantine floor, and at doorways to clients’ hotel rooms. Only hand hygiene and surgical masks were ‘recommended’. Hotel quarantine clients (guests) were recommended to wear surgical masks ‘if tolerated’.

It is obvious that this operation did not benefit from epidemiological advice. In evidence to the Coate Inquiry, Professor Lindsay Grayson (Director of the Austin Hospital’s infectious disease department) said that, as well as training in the proper use of masks, security guards at any point of contact with hotel guests should have been dressed in full personal protective equipment (PPE) to the same standard as health workers. It is also common sense. Epidemiological advice should not even have been needed. Everyone who reads a daily newspaper or receives a digital news feed would already have known how infectious this disease was. The report by Rosemary Lester states:

‘The use of appropriate PPE is recommended in all healthcare settings, including primary care and health services. … Where the use of appropriate PPE is recommended the equipment must be suitable and maintained. Appropriate training must be provided to the individual using PPE at a time prior to the pandemic to ensure they become competent and proficient in its use’ (p.48).

The managers of Operation Soteria did not exercise their imagination enough to see that the situation of hotel quarantine was a ‘health care setting’. They followed the normal, easy solution of contracting out peripheral health work to private companies, without first ensuring that the workers were properly trained in the use of protective equipment and suitably supplied.

The Health Department leader of the Covid 19 response decided to spread responsibility for the operation among government bureaucrats including police and emergency services. Lester’s report states, ‘The Chief Health Officer or delegate would assume the role of State Controller and liaise closely with the Emergency Management Commission’. The Chief Health Officer of Victoria was reportedly excluded from taking control.

The private companies sub-contracted the work to labour supply companies employing casual workers. Many of these workers in the so-called ‘gig economy’ had several different jobs on the go. Unprotected from the virus, they contracted disease from returned travellers (or allegedly from a night manager of one of the hotels) and, before they began showing symptoms, spread the virus to their families and to colleagues in other work settings, who in turn became infected and spread the virus further through the community, resulting in an explosion of over 18,000 cases of the virus.

The Head of DHSS at the time had no qualifications in either epidemiology or public health; in fact no qualifications in any branch of health. This person was simply a career bureaucrat with a Masters in public administration. The division of the Department of Health and Human Services responsible for epidemic planning (the division of ‘Regulation, Health Protection and Emergency Management’) was headed by another career bureaucrat. This person was previously Deputy Secretary, Budget and Finance, a ‘Director of the Allen Consulting Group and a partner in Deloittes’.

The Division’s functions are described as bringing together ‘professional and epidemiological expertise to protect the Victorian public from avoidable harm. The daily work of the division brings us in contact with such risks as drugs, poisons, infections, contagions, emergency

incidents and the risks of super bugs and pandemics’. In practice, before the outbreak, health professionals were sidelined and given no control over the planning of the response to Covid 19.

The Coate report found that blame for the outbreak could not be assigned to any individual. Nevertheless the Minister of Health was subsequently dismissed from her position, and later resigned from Parliament. The Head of DHSS resigned to become a partner in the ‘strategy focused’ business consultancy firm EY Port Jackson Partners based in Sydney. The divisional manager was stripped of responsibility for Covid planning. Yet the systemic failure of New Public Management was not noted and the concept continues to operate across all departments of the Government of Victoria.

When cautious steps to contain the outbreak failed, the Government of Victoria took decisive steps to contain the virus by preventing people from congregating and thus transmitting the disease. This strategy, coupled with effective testing and tracing was highly successful. But problems with quarantine hotels have since emerged repeatedly in Australia, resulting in temporary lockdowns. Step by step the State Governments have learned from experience what works and what does not. They are now demanding the establishment of specialist out of town quarantine stations to replace inner city hotels.

This quick learning by local political leaders, trusting epidemiological advice, is what has spared Australia from the worst outcomes of Covid 19. But it is time to reassess the effect of New Public Management, which brought the State of Victoria so close to disaster and cost so many lives. The belief that professionals simply promote their own material interests is wrong. Professionals have interests, of course, specific to their disciplines, but those interests can and often do coincide with the public interest. Public health professionals, for instance, have an interest in and a commitment to public health.

Politicians in a democracy are by definition non-experts. Their job is to represent their constituents. That job cannot include understanding all that is required in any particular field to achieve the public interest. The issues involved are invariably complex and require specific training and knowledge. The politician’s job is to listen to professional expert advice and then decide how to act. Fortunately that is what political leaders in Australia have now learned from Covid 19. The NPM assumption that political leaders can do without professionals in leading roles in the public service has been shown to be wrong.

Tags crony capitalism

best practice governance models of excellence service

A question of governance

The quality of Governance ultimately defines who we are and it is failing us

This was the subject Transport for Melbourne addressed in our annual forum in 2017, the proceedings of which can be viewed on our website under forums. It was also the subject of an earlier blog of mine. Our president Nick Low has discussed this in more detail in his short paper below. Nick writes “My purpose in this paper is to shift the debate from the superficial to the underlying nature of governance today. Dispute how we will, but for God’s sake let’s have the debate. ” This is an important paper and deserves to be read by a wide audience.

A question of governance

To bring about change in a democracy such as Australia’s we like to believe that progress is achievable through political processes. We believe that the acts of joining community groups, joining political parties – or forming them – protesting in the media, in the streets, and of course voting are sufficient to bring about beneficial social change.

We may also believe that, even though the public service is depleted, as I argued in my speech at the launch for TfM, it has the power to bring about beneficial change, if only it would remember how to plan.

The daily political turmoil that the press and social media report at high volume and great length is, I argue, a distraction from the underlying problem of democratic governance which is powerful because invisible, like the corona virus. It also inhabits bodies and minds.

From my most recent research reported in my book Being a Planner in Society, the on-line Appendix to the book, and my blogs on Edward Elgar’s website I now believe that the problem with the model of governance in Australia, and probably in many other ‘liberal’ countries, goes much deeper. In fact it appears that governance under the malign influence of neoliberalism has destroyed all possibility of planning and, with, it all possibility of democratic change by the normal means.

I am not advocating violent revolution. But unless the governance model changes, benign social change is out of reach. The governance model can still evolve. But first it must be recognised and fully understood.

In what follows I’m going to be ‘throwing the baby out with the bathwater’. Yes, in every ideology there are some worthwhile ideas along with the bad ones. But in a short address there is no room for babies. Someone will no doubt quite properly point them out. My concern here is the filthy poo-sodden bathwater. If you want a more nuanced critique please read my book

The governance model

The model is rooted in the ideology of utilitarianism, modified by neoliberalism and further transformed by the resilience of parliamentary democracy into what I call ‘crony capitalism’ – or to give it its more polite name ‘clientelism’.

Utilitarianism

This is the philosophy made famous by Jeremy Bentham who said that the idea of natural human rights was ‘nonsense on stilts’. All that counted was the existence of pain and pleasure (or happiness). Public policy should aim to produce the ‘greatest happiness of the greatest number’, the utilitarian principle. Law based on the utilitarian principle was the only rational basis of rights. Law was to enshrine the rational principle of market exchange.

How do you measure ‘pleasure’? Well, you don’t bother. You just assume that there is a simple linear relationship between the amount of pleasure a person has and the amount of goods and services that person consumes. So if there is still pain suffered by some in society, it is offset by the greater pleasure experienced by others. It doesn’t matter that the many suffer ‘pain’, because the few experience immense amounts of ‘pleasure’. Conversely if a few suffer death it is offset by the economic pleasure of the many. This pernicious idea is false. If utilitarianism assumptions were correct James Packer on his giga-yacht would be among the happiest people alive.

You may have noticed a philosophical debate going on in the opinion pages of The Age. This is between utilitarians like Peter Singer and Duncan Maskell and human rights supporters contributing to the letters page. The ostensible debate is about whether old people should be sacrificed for the greater good represented by young lives and ‘business’.

Neoliberalism

Neoliberalism, or economic rationalism as it is sometimes called (it is no more and no less rational than any other ideology) began with two aristocratic Austrian philosophers, Ludwig von Mises and Friedrich von Hayek. Hayek founded the Mont Pelerin Society to discuss and disseminate his gospel. Basically the gospel says that only free market exchange would deliver societies from the slavery of socialism. Free markets had to be protected by a regime of elite ‘elders’.

Law, Hayek said, should precede and override legislation. ‘Law’, governing the behaviour of the market economy, would be determined by a legislative assembly consisting of wise elders (over 45 years old) serving electoral terms of fifteen years. Their election would not be subject to universal suffrage, and anyone receiving any benefits from the state (pensions, unemployment benefits, government salaries) would be automatically excluded from voting. Hayek’s plan was to set up a governing authority beyond political control to prevent elected politicians interfering with the market. Hayek’s position was reinforced by other disciples such as Milton and Rose Friedman (‘the Chicago School’) and the ‘public choice theorists’[1].

Hayek, presciently, advocated a network of what he called ‘second-hand dealers in ideas’ to promote his gospel. We would call them neoliberal think tanks with a mission to return societies from post-war egalitarianism to the proper order of things, namely economic domination by the wealthy, or as they themselves call it, ‘meritocracy’. I prefer the term plutonomy[2]. Helped by corporate donations, these ‘second-hand dealers’ have been so overwhelmingly successful in transforming the governance model that few today really notice that governance has been transformed.

Occasionally, when governments look like asserting themselves, the libertarian think tanks finance campaigns to sow doubt in the public mind. Thus, we have seen international campaigns against government action on tobacco smoking, on climate change, and most recently on Covid19 (e.g. ‘The Great Barrington Declaration’). Because scientific knowledge is, and should always be, debatable, the campaigns enrol a few scientists who dispute the current consensus and add on a mass of libertarian supporters to forge a sceptical mass. Naomi Oreskes and Erik Conway described this process in their book, Merchants of Doubt.

Further readings providing empirical support for the above are the vast volumes by Thomas Piketty, Capital in the 21st Century and Capital and Ideology.

Crony capitalism

Also unnoticed, in the hands of the second hand dealers the pure neoliberalism of Hayek became transformed into something close to its opposite; crony capitalism. The problem for the neoliberals is that electoral politics refused to go away, for the simple reason that people value universal suffrage that holds governments to account.

The political class therefore continued to hold power even while they paid lip service to neoliberalism. So, the governance system we have today is a hybrid between corporate economic power supported by antidemocratic neoliberal ideology and political power supported by universal suffrage: that is crony capitalism. This result was what Hayek regarded as ‘the worst of both worlds’: deals between political leaders and private corporations. At its worst, as the philosopher John Rawlston Saul pointed out twenty years ago[3], crony capitalism leads to fascism (he cites Mussolini) – via populism (Trump and Johnson) as we see in the USA and Britain today.

The neoliberal ‘hollowing out of the state’ has been supported by a theoretical spawn of neoliberalism called ‘New Public Management’. The ideology of NPM can be interpreted in different ways. It provided a salutary critique of sclerotic bureaucracies that had become distanced from the publics they served, hence ‘customer service’ became a byword for NPM but that admirable goal covered something more sinister. The scope and ambition of NPM is breathtaking;

New Public Management (NPM) is part of the managerial revolution that has gone around the world, affecting all countries, though to considerably different degrees. … The theoretical background of NPM is to be found in the strong criticism of a large public sector, to be found in the public choice school as well as Chicago School Economics, both attacking since the mid-1960s prevailing notions about public sector governance (Lane, 2000: 3)[4].

The essentials of NPM are these: the use of quasi-market structures for delivery of services, contracting out of government functions to private firms, setting performance targets, continual monitoring of performance, and installing management experts in senior executive positions. Professionals relevant to the government function of departments (e.g. transport planning, public health, environmental conservation, city planning, building regulation) were replaced in senior positions by generalists trained in ‘management’. These managers were often recruited from private sector firms or consultancies. What this management training in fact amounts to is in-depth indoctrination in neoliberal ideology.

The unintended consequences

It is easy enough to overlook the structural failure which gives rise to events because we look for culprits in politics and business management.

The corruption of urban and regional planning in which deals are done between developers and governments to enrich the latter at the stroke of a pen.
The absence of a transport and land use plan forming a context for investment in hugely costly infrastructure projects.
Failures of building regulation, outsourced to private firms, resulting in hundreds of tower blocks being covered in flammable cladding.
The scarcely regulated private recycling industry resulting in flammable material stored in huge warehouses, catching fire and belching toxic smoke over residential areas.
The absence of a viable national plan to reduce carbon emissions to safe levels while ensuring affordable and reliable electricity supply. Climate change is always tomorrow, never today!
Today, in front of our mask-clad noses is Covid19. The Victorian second wave has claimed 800 lives, and counting. Aged care failure nationally has claimed more than 600 lives. As I write (October 2020) there is a manhunt underway led by the eminent jurist Jennifer Coate to determine who is to blame. Even before finalising its report, the manhunt has claimed two scalps: the Minister of Health, Jenny Mikakos, and the Secretary of the Department of Premier and Cabinet, Chris Eccles. But the most telling result of multiple interrogations has been that nobody knows who is to blame. That’s because no body is to blame.

Andrews is not to blame. Mikakos and Eccles are scapegoats. Brett Sutton may be next. The governance system is to blame, but you cannot punish a system. This is the real conclusion of many judicial inquiries into governance failures over recent years: e.g. into banks, the superannuation industry, aged care, disability.

The example of Victoria’s second wave

It has been established by genomic tracing that all of the Victorian second wave of infection originated from two quarantine hotels, spread by hotel security guards who were insufficiently protected from the virus.

There has been no lack of planning for pandemic infection. In recent years planning began with the report by Dr Rosemary Lester published in 2014[5]. Lester is a highly qualified public health and epidemiology expert. Her report was delivered to the emergency management authority (Emergency Management Victoria)[6]. The epidemiological expertise shines through the report. The report was shelved.

Under the name of the Minister for Health, a second planning report was published in March this year (2020) authored by managers of the Victorian Department of Health and Human Services (DHHS). The authors plainly did not have a public health or epidemiological background. It is a managerial document focusing mainly on the (then) three stages of governmental response. It draws heavily on the similarly managerial report from the federal Department of Health.

In June an ‘operation’ was devised by DHHS named ‘Soteria’ (after the Greek goddess of rescue) designed to manage quarantine of returned overseas travellers. This operation is quite mysterious[7]. The DHHS has nothing on its website about the operation, who devised it or what its aims were. At the public inquiry headed by Justice Coate a sheet of instructions to ‘hotel security staff’ emerged: ‘OPERATION SOTERIA, PPE Advice to Hotel Security Staff and AO’s (sic) in Contact with Quarantined Individuals’. It advised that personal protective equipment was not required to be worn by security staff at any point of contact. The latter include the hotel lobby, the quarantine floor, and at doorways to clients’ hotel rooms. Only hand hygiene and surgical masks were ‘recommended’. Hotel quarantine clients (guests) were recommended to wear surgical masks ‘if tolerated’.

It is obvious that this operation did not benefit from epidemiological advice. In evidence to the Coate Inquiry, Professor Lindsay Grayson (Director of the Austin Hospital’s infectious disease department) said that, as well as training on the proper use of masks, security guards at any point of contact with hotel guests should have been dressed in full personal protective equipment (PPE) to the same standard as health workers.[8] It is also common sense. Epidemiological advice should not even have been needed. Everyone who reads a daily newspaper or receives a digital news feed would already have known how infectious this disease was.

The report by Rosemary Lester states:

The planners of Operation Soteria did not see that the situation of hotel quarantine was[9] a ‘health care setting’. Instead they talked about ‘security’. They followed the normal, easy solution of contracting out peripheral health work to private companies, without first ensuring that the workers were properly trained in the use of protective equipment and suitably supplied. The Health Department leader of the Covid 19 response allegedly decided to spread responsibility for the operation among government bureaucrats including police and emergency services. None of them were health professionals.

Lester’s report states, ‘The Chief Health Officer or delegate would assume the role of State Controller and liaise closely with the Emergency Management Commission’. He did not assume that role. It is easy to see that the linguistic slippage from ‘health care’ to ‘security’ masked what was most necessary in the looking after the needs of those quarantined in hotels.

The private companies sub-contracted the work to labour supply companies employing casual workers. Many of these workers in the so-called ‘gig economy’ had several different jobs on the go. Unprotected from the virus, they contracted disease from returned travellers (or allegedly from a night manager of one of the hotels), and, before they began showing symptoms, spread the virus to their families and to colleagues in other work settings, who in turn became infected and spread the virus further through the community.

The hotel quarantine planning debacle has had ramifying effects. Failure of quarantine has meant that the federal and State governments have imposed draconian controls on people returning to Australia from overseas, in breach of their human rights. And because governments believe they are unable to operate effective quarantine control for returning travellers, Australians are now banned from leaving the country.

Yes, the particular features of the Sars Cov 2 infection are ‘unprecedented’ as everyone now says. But thinking outside the box, thinking with imagination, does not depend on precedent. That, as Saul states, is an elementary human skill which seems to have been turned off by managerial ideology.

Professor Jan Carter, former head of policy and research at the Brotherhood of St Lawrence, writes in The Age (07/10/2020, p. 21)[10]:

In subsequent years, the assumptions of NPM took hold, claiming content-free management in general (and MBA holders in particular) were superior heads of divisions. Now, DHHS seems to the outsider to be an inward-looking oligarchy, devoted to replacing its own with its own and keeping potential executive managers such as Sutton at bay and under control.

She continues, ‘It is too early to say whether the tide has turned again, but in the final deliberations of the Coate inquiry, the reasons for the banishment of specialist managers in the DHHS and the twin assumptions that contracting out and content-free management are always the best, need close examination’.

The question of governance goes far beyond the Coate Inquiry and Covid 19. To ‘turn the tide’ we need an inquiry into the management of, and within, the public service, an inquiry of the scope of the Royal Commission Government Administration conducted by Coombs for the Whitlam Government.

Tentative conclusions

Utilitarianism can be a useful and progressive philosophy, but it does not supplant human rights or correct social injustice. Some forms of neoliberalism have merit (for example the German variant). Public sector management is a field of study as profound and extensive as that of any other profession[11]. I do not believe that NPM is completely flawed.

But managerial concepts can be employed, and have been employed, for purposes ranging from the humane and compassionate to community suppression and genocide. In Australia NPM is being employed for the purpose of class struggle, for the strong and wealthy against the weak and poor. We have to get used to calling out class struggle where it occurs even though the classes in question are quite different from those of Marx’s day (I address the class issue in my book). In the process good governance suffers, across the social services: transport, public health, education, social welfare.

Having said that the problem we have is ‘structural’, it is also true that governance models or ‘structures’ are only ever powerful when they become embodied in the minds and activities of persons. Thus, in looking for the effects of NPM, we need to expose the ideology which shapes the advice to politicians. The aim is not to apportion individual blame but to seek out the structural assumptions that individuals embody.

We have to find a way of integrating a variety of professionals in public health, city planning, land use and transport planning, social welfare and housing into the most senior management positions in the public service. That should not mean doing away with sensible public sector management reforms which have been undertaken in the last twenty years. We need a broad review into public sector management to build on reforms that were explored in the 1970s and 1980s under the proposition that public services are not the same as ‘commercial enterprises’ as the CEO of Australia Post recently claimed. Unfortunately Christine Holgate is right when she says that Australia Post is a commercial enterprise. Under NPM, that is what it, and so many of our public services, have become.

My purpose in this paper is to shift the debate from the superficial to the underlying nature of governance today. Dispute how we will, but for God’s sake let’s have the debate.

[1] Though not by all the members of the Mont Pelerin Society as I point out in my book.

[2] Plutonomy is a system in which economic oligarchies have accumulated sufficient wealth to free themselves from national constraints, a global economic system, delinked from national economies, serving the very particular demands for goods and services of the ultra-rich.

[3] Saul, J. R. (2002) On Equilibrium, Penguin Books Australia, p. 36.

[4] Lane, J-E. (2000) New Public Management, London and New York: Routledge.

[5] file:///C:/Users/npl/Downloads/VHMPPI%20Final%20version%20-%20PDF.pdf (downloaded 20/08/2020)

[6] An organisation mostly designed for bushfire management.

[7] Transcript of proceedings of the Inquiry into the Covid-19 Hotel Quarantine Program, Day 3 p. 23 (17/08/2020). ‘Various iterations of Operation Soteria had many different moving parts involving different agencies with separate roles. An issue will be whether it was too fragmented to work efficiently, especially given the need for quick coordinated action that is proposed in the emergency environment.’ https://www.quarantineinquiry.vic.gov.au/sites/default/files/2020-08/Transcript%20of%2017%20August%202020_0.pdf (accessed 21/08/2020)

[8] Transcript of proceedings of the Inquiry into the Covid-19 Hotel Quarantine Program (17/08/2020) pages 48 and 51.

[9] Cunnigham, C., Mills, T. and Dow, A. (2020) ‘Bureaucrats blocked plan for Sutton to lead crisis’, The Age, Melbourne, 11/09/2020, p. 1.

[10] Professor Carter has undertaken a number of reviews and projects for the DHSS, including for the Cain, Kennett and Bracks governments. She is a professor at Melbourne and Deakin Universities.

[11] As is evident from the scholarly survey of the field by Shafritz et al. (2017), now in its ninth edition. Shafritz, J.M., Russell, E.W., Borick, C.P. and Hyde, A.C. (2017 Introducing Public Administration, Routledge: London and New York.

megaprojects public transport value for money

Risks of Megaprojects in Post-Covid Recovery

Post author By Nicholas Low
Post date 14/09/2020
No Comments on Risks of Megaprojects in Post-Covid Recovery

The Grattan Institute’s transport and cities program director, Marion Terrill has been urging caution in the rush to build mega-infrastructure projects for a post-Covid recovery (The Age 09/09/2020). Support for her position comes from a formidable source. Danish geographer and social policy analyst Professor Bent Flyvbjerg, in a paper to be published shortly in the journal Environmental Science and Policy argues that, in the case of certain kinds of events, we cannot rely on accumulated data from the past to predict what will happen in the future. Among other kinds of events, he lists pandemics, bushfires and floods, all too familiar to Australians.

Flyvbjerg is the Director of the Major Project Management Programme at Oxford University. He made his name through exhaustive analysis of hundreds of multibillion megaprojects worldwide such as motorways, rail lines, airports and dams. He showed that, on average, such projects failed to meet their performance goals, projects ran late and over budget. Final benefits were overestimated and costs underestimated. While a high level of performance was always argued for each individual project, the mean for actual completed projects showed otherwise.

The statistical theory predicting such underperformance is called ‘regression to the mean’. In simple terms, over-optimistic assumptions about individual cases are invalid because they ignore the impact of unpredicted random effects on the outcome. A recent example in Melbourne is the discovery of high concentrations of PFAS chemicals in contaminated soil dug out for the West Gate Tunnel. But in all such projects there are factors that cannot be predicted which can be summed up as ‘luck’. The actual performance of megaprojects, Flyvbjerg argued, reverts to the historical mean for most actual projects.

Now, in new research, he challenges the premises of his own past work which was based on seeking the mean performance of megaprojects. He now argues that regression to the mean is meaningless when considering the risks of mega-projects affected by unpredictable future variables such as climate change and pandemics.

The reason lies in the unusual extremes now known to be occurring. The distribution of the performance of any large number of actual cases normally has the shape of a bell curve with a large hump in the middle and a ‘tail’ with extreme cases showing up at each end. We don’t need to worry about the positive tail where the outcome is much better than expected. We do need to worry about the negative tail where the outcome is much worse than expected. But Flyvbjerg goes further, arguing that in the rapidly changing context of pandemic or climate change risk we have to take account not only of past events but also of the future.

When we find evidence of new and larger extremes becoming ever more frequent in any distribution of events over time (what he calls ‘fat tails’), we need to anticipate the possibility that it will be these fat tails and not the mean that will give us clues to the future. Hence his theory of ‘regression to the tail’.

Flyvbjerg argues that where regression to the tail applies, prudent decision makers and their risk managers will do two things: reduce the tail by mitigation measures, and avoid tail risk by taking a cautious approach. He particularly targets measures to rebuild the economy after the Covid 19 pandemic. These measures include giant construction projects with ‘fat-tailed’ risks such as multibillion dollar megaprojects in IT, transport, energy, water, education, housing, health and defence. The financial risks increase with the uncertainty of the future, which in a post-Covid world afflicted by global atmospheric heating is very uncertain indeed.

As far as transport is concerned, Flyvbjerg, like Terrill, points out that lockdowns and stay at home measures have reduced traffic and pollution levels. The aim should be to prevent traffic demand from returning to pre-Covid levels, to turn the focus from high risk supply-side measures (freeways, massive rail projects to meet assumed demand) to demand-side measures such as encouraging working from home for at least part of the working week. I would add, following Flyvbjerg’s risk mitigation logic that low risk supply-side measures (which may also shape demand) such as providing safe infrastructure for cyclists and pedestrians, and serious investment in fast and effective bus transport across metropolitan cities and regions must also be included to relieve traffic congestion.