Deregulate or Perish
All of you will doubtless recall that slogan "Populate or Perish", which came so readily to the lips of politicians in Australia in years past. Long before that time, Western Australians in particular had cause to be aware of the same refrain -- although, so far as I know, it was not actually employed at that time.
I have recently been reading Mary Durack's little book, To Be Heirs Forever, written in celebration of the 150th anniversary of the settlement of this State. Many of you -- and many other Australians -- will doubtless have encountered it in its earlier form as the monodrama, Swan River Saga. It was produced originally for the 1972 Perth Festival.
As many of you will therefore know, To Be Heirs Forever is the story of a remarkable woman, Eliza Shaw, who in 1829 came with her family to settle in what was then this colony. Notwithstanding all their hard work, she and those other early colonists found themselves almost overborne in their struggle against an environment of which they had no understanding originally and with which it took them some time to come to terms.
By 1848 the incoming Governor Fitzgerald "found the Treasury almost depleted". The Colony was suffering from "an administration that had set too high a price on Crown land" and "had failed to overcome the crippling lack of labour". Note incidentally that early example of the ill effects of a governmentally imposed "just price". In June 1850, following his advice to London, a "first consignment of 75 convicts, in charge of 50 soldier pensioners, some of them with wives and families, arrived at Fremantle".
This was, in effect, an injection of human capital. It was the convict labour force which, until the abandonment of transportation in 1868, produced many of the public works and general infrastructure of the Colony. At the time in question capital provided in this form was, indeed, the most effective way of generating such developments. No mere subvention of gold from Her Majesty's Treasury in London or anywhere else could have done so in the absence of a labour force with which to employ such financial capital.
So, as I say, Western Australians have been familiar with the essence of the old refrain "Populate or Perish" almost from the outset of their State's existence.
Today I want to talk to you about a different refrain -- and one, I suggest, which should be of particular importance to such a gathering as this of small business men and women. (I fear that my respect for the English language leads me to refuse point-blank to use such words as "businesspersons".)
Today, I suggest to you the refrain "Deregulate or Perish".
I should say at the outset that there is a sense in which that antithesis could be seen as misleading. After all, our economy today is highly regulated -- and growing more so by the day at the hands of our various governments. Yet notwithstanding our relatively poor economic performance -- over recent years in particular -- it has continued to grow, albeit slowly. Even in per capita terms we have seen, particularly in the post-War period, a major increase in real output per head and hence in the living standards of all Australians.
Surely, it might be said, there is no question here of "perishing" even if we continue to meander on in our present increasingly regulated way? Life is, after all, fairly comfortable for the majority of Australians. That would be so even if one were to put more credence in the exaggerated claims of the poverty industry than I personally do. Thus, if we simply extrapolate the past we could expect the future to grow, albeit perhaps rather gradually, more comfortable still.
So what is all the fuss about? -- and what is all this alarmist talk about "perishing" should we fail to move more extensively to deregulate our economy?
The answer to that question has a number of facets, not all of them purely economic ones.
The chief reason why, looking ahead, we cannot for much longer continue comfortably -- or complacently -- to extrapolate the past is that the conditions, under which that past has become the present, have already changed or are in process of changing.
In the older economics text-books -- the kind from which I learned such formal economics as I ever did -- the growth of an economy used to be related to the so-called basic "factors of production" -- land (or physical resources more generally), labour and capital. Let us think in turn about how each of those factors is likely to be affected by current -- and prospective -- developments.
Let me deal briefly first with physical resources. In one sense they will remain whatever be the future. I say "in one sense", however, because that statement skates over a particularly important qualification which is relevant to my theme today.
It is easy to think of physical resources as being somehow "fixed". A century hence, Western Australia will be neither bigger nor smaller, and it will presumably possess the same store of mineral and other treasures (less any that have been mined in the interim) as it has today.
Yet Western Australians in particular will be aware that that last statement, while true in one sense, is quite untrue -- or economically unhelpful -- in another. After all, for many years this State possessed as it does today enormous deposits of iron ore.
I say "this State" possessed them because in those days there was, quite properly, no nonsense talked about "land rights" for one category of Australians only, in respect of them. Indeed, had there been, they might never have been developed.
Those deposits were, however, generally unknown to us. They had not been properly located, explored, their quality researched or markets for them (without which they have no economic value) found. What changed all that -- and we should do well to bear that point clearly in mind -- was the removal of a Commonwealth Government regulation banning the export of iron ore.
The fact is that at no time do we know what our physical resources are, because those resources are themselves the product of technological and other processes the full consequences of which for the future we are quite incapable of discerning. Moreover, a resource today can, through processes of substitution resulting from the march of technology, become of relatively little value fifty years hence. Yet what this example also demonstrates is that our physical resources at any time will also be in part a product of the framework of regulation governing our exploration for and development of them.
I could develop these points much further. The future of Australia's physical resources will not be independent of the approach we bring to the regulation of their development (e.g. through our approach to so-called "land rights") or of the approach we bring to the regulation of our economy more generally.
That proposition is probably self-evident to everyone in this room. That makes it all the stranger that it still seems to be difficult for many of our politicians to grasp. Anyone, for example, looking at the record of (non-) development of mineral resources in the Northern Territory since Mr. Fraser's legislation regarding Aboriginal "land rights" will see what I mean -- at any rate, anyone other than the Minister for Aboriginal Affairs.
Let me take another still topical example. Contemplate the processes whereby Western Mining Corporation Ltd has had to deal with no less than 54 Commonwealth and State Government agencies, over literally years of frustration (and expense!). It has done so in its effort, in partnership with BP Australia, to bring into being what has the potential to be the greatest uranium mine in the world. That is what I mean about the relationship between our future inventory of physical resources and the regulatory regimen within the framework of which that inventory is to be delineated.
This is the material for an address in its own right. Today however I propose to leave it there and to pass on to those other two "factors of production", labour and capital. In doing so, I want to draw out how a changing world will not for much longer permit even our trade union leaders to go on turning their backs on reality. No longer can we comfortably assume that, since our living standards have increased gradually over the years past, they will go on doing so in the years ahead despite the shackles imposed upon that process by trade unions, governments and other regulatory forces.
In this I shall touch also on a number of related matters which, in one way or another, will also influence the productiveness of our economy -- that productiveness which constitutes the only basis upon which, after all, any future standard of living can be based.
Labour Market Rigidity
The first thing to be said about the labour market is that it is the largest and most important market in the economy. Changes -- or, equally important in this context, lack of change -- in it will be fundamental to our future. All of you will be well aware that the essence of any market is flexibility -- particularly as to price of the products being offered in it. Yet that is not how most Australians think about the market for labour in this country.
So rigidly entrenched is that "mindset" that indeed its very existence can seriously be advanced by a Committee of Inquiry as an over-riding reason why it would not be sensible to argue for any major change in the framework of regulation governing the labour market. This, it is said, is "industrial relations reality".
As to that, I shall only say that that seems to me a most unreal description of "reality". If "industrial relations reality" requires Australians to go on burying their heads in the sand, they -- and their would-be mentors in the just published Hancock Report, to which of course I was referring -- should not be surprised when their tails are run over by the economic juggernaut gathering force in freer economies beyond our shores.
The Hancock Report, however, in a sense constitutes the last gasp of our Industrial Relations Club dinosaurs. Looking back a decade hence it will, I believe, be seen as that final flowering of the species which biologically often occurs before the Darwinian processes commence to bring about its destruction. In this case we have a ponderous regulatory giant which has, above all in this Report, shown itself to be totally incapable of adaptation to a rapidly changing economic environment. As such, it will therefore suffer the fate of other such dinosaurs overtaken by changes in their environment with which they were no longer capable of contending.
I therefore propose -- those few remarks apart -- to leave that Report aside today. Unlike the Campbell Report, where a great opportunity to create (and manage) change was seen and intelligently grasped, the Hancock Report represents an equally great -- perhaps even greater -- opportunity wasted. If only in terms of the reputations of its authors over the years ahead, that is a very great pity.
Let us however turn to more cheerful topics -- and even in this graveyard of the hopes of rational beings some cheer is still to be found.
Last August, in an address here at the University of Western Australia, I referred to the deplorable results of the regulation of our labour market, and to one such result in particular. At that time I said -- and I repeat today -- that:
There is no single fact more disgraceful to the conduct of our national affairs in Australia today than the manner in which we have permitted more than 25 per cent of 15-19 year olds in the work-force to be unemployed when it is clear that, without real difficulty, that proportion could be in all probability reduced to, or even below, the average rate of unemployment..(now 8.5 per cent).
The great body of decent Australians... knows that the present situation is both socially shameful and in the longer run nationally disastrous. The truth is that our system of wage determination today (which is chiefly responsible for this phenomenon of youth unemployment) constitutes a crime against society..
I have since had no reason to retract a word of those remarks.
What, however, you may say, is there cheerful in that? After all, since that time, an enormous amount of effort has been expended, particularly but not only by Commonwealth Government Ministers, to explain away -- one might almost say, condone -- our disgracefully high rates of youth unemployment. According to these political -- and in some cases academic -- sages, those rates result from any number of reasons other than the legally minimum wage rates (and other conditions of employment) imposed by our various arbitral tribunals at both State and Federal levels. (In doing so, incidentally, those tribunals conspire with trade union "leaders" to deprive of job opportunities the sons and daughters of, among others, the union members whose interests those trade union "leaders" are supposed to represent.)
Late last year I was approached by the National Westminister Bank Quarterly Review, which proposed to devote its May 1985 issue to the single topic of unemployment policy (chiefly in Britain), to write an article on youth unemployment in Australia. That article was published recently and, for those interested in pursuing those matters in detail, I commend it to you. I mention it here chiefly in order to plead that I should not now go over the same ground covered in it.
Towards the end of that article I did however say -- and this is the cheerful note to which I referred earlier -- that:
...a lively debate (on this issue) is now at long last in progress, and there are even some signs appearing that, in the Opposition Parties, at least, there is growing acceptance that the real solution to the youth unemployment problem is going to have to be found within the wage determination system (or rather, by taking the wages of young people outside that "system"). Meanwhile, in a move which would delight the heart of the "Secretary for Symbols" in Mr. Gary Trudeau's famous "Doonesbury" comic strip, the Office of Youth Affairs has been transferred, since the election last December, to the portfolio responsibility of none other than the Prime Minister himself...
That last point aside, we should not underestimate the importance of these developments. We live, thank goodness, under that rather rare form of government, a democracy, and debate is democracy's lifeblood. That is why indeed the whole national fraud of "consensus" -- a process specifically designed to suppress debate -- is so inimical to our democratic system.
The fact is that the topic has not gone away. In this State there has been action both in the Parliament and before your State Industrial Commission stemming from the view, increasingly current because it is so obviously true, that the chief cause of your unemployment (not only of young people) is the regulation of wage rates and the contracts underlying them.
Nor will all the protestations of trade union leaders, some bureaucrats, assorted academics or Ministers of Labour, banish the topic from the agenda of national debate. It will continue, as a growing and festering sore -- taking as it does, inter alia, the pitiless form of more and more of our young people being condemned to lives of either idleness, law-breaking or "make work" occupations (as distinct from real jobs) provided by governments. In turn, the suppurations from that sore will continue to assail the nostrils of our politicians. That will be so no matter how desperately those politicians may continue to apply those various scented policy handkerchiefs to which, over the past nine months or so, they have increasingly had resort.
Australia still likes to think of itself -- and certainly describe itself -- as a free country. It is therefore a remarkable fact that the one saleable asset which all Australians possess and of which (illness and other forms of handicap aside) they cannot be deprived -- namely their labour -- they are forbidden by law (not to mention trade union muscle!) from selling freely.
That is, they are forbidden to sell their labour below those various minimum prices (known in this context as wage rates) imposed by selected groups of jackasses (and some jillasses) statutorily empowered to do so in their roles as arbitral tribunals.
How on earth does it come about that in Australia, a land of free men and women a land of immigrants who in many cases have come to our shores to escape from one form of tyranny or other -- we have allowed ourselves to become so enslaved? What right does any government have? -- what right do any of those groups of jack - or jillasses have? -- what right, above all, do trade unions have? -- to deprive Australians of that most precious of their freedoms?
I have no doubt that there were times, albeit now in the rather distant past, when if that question had been asked it would have been answered by, on the one hand, acknowledging the deprivation of freedom involved in our national system of arbitral tribunals but, on the other hand, arguing that the relinquishment of liberty was a cost worth paying for the benefits which were believed to flow from doing so. Frankly, I doubt whether that was ever true; but today I am not interested in pursuing the merits or otherwise of the historical evolution of our system of regulation of wage rates and other conditions of employment, but rather of addressing its manifestly harmful consequences today.
Insofar as those consequences are to be seen in the phenomenon of youth unemployment -- and indeed, unemployment more generally -- they are of course depressingly familiar to everyone in this room. There are, however, many other consequences, some of them less apparent but all of them detrimental.
Trade Union Power
One such other consequence is the inhibitions nowadays upon employers to run their own -- or their shareholders' -- businesses in a businesslike manner. Our arbitral tribunals -- and our legislators -- have enormously enhanced the power of trade unions. Accordingly, much managerial time and energy is these days spent in seeking to anticipate union objections to any significant move by management to enhance plant productivity, or in buying off, in one way or another, the objectors. One result is that strong inhibitions now exist against innovation and change in their entirety. The notorious decision last year by the Commonwealth Conciliation and Arbitration Commission in the "Job Termination, Redundancy and Change" Case marks a milestone in the movement of Australia towards what is in effect "workers' control".
For some, that may not matter a great deal -- indeed, for some ideologists of the Left, it is a consummation devoutly to be desired. The great body of commonsense Australians would not however join them in that view. They retain a pride in their country and have no desire to see it fall under the influence of some foreign ideology. They understand that businesses cannot be run by "workers' councils" or any of the other paraphernalia of the "industrial democracy" zealots. They are, too, less than impressed by the growing sense of paralysis which they can observe falling upon their country. In the economic arena, the growing incapacity of management to manage can lead only to further slowing-down in our already unsatisfactory economic performance. Yet it is that performance which, I repeat, constitutes in the end the only base from which the standards of living of all of us can be drawn.
That is, so to speak, the ultimate economic consequence of our long build-up of regulation in this area. But almost more important, in the process of our country "perishing", are the consequences which flow from the suppression of individual liberty by the trade-union bullies whom Australian governments have either deliberately empowered, or towards whose flagrant breaches of human rights they have turned their collective blind eyes.
I am referring here not principally to incidents of the kind we have seen recently in Queensland. I refer rather to the thousands of acts of oppression against individuals carried out by trade union bullies on shop floors and work sites every day throughout this country. I refer to the physical stand-over tactics, to the actual denial of the right to be employed unless one has purchased a union ticket, to the monetary extortion against vulnerable employers -- including, in many cases, in order to line the pockets of individual trade union organisers -- and so on.
These are the signs of a society in decay, as is the fact that so little public attention is paid to them. It is said that society gets the governments it deserves. It might also be said that we get the kind of behaviour by our trade-union hit-men that we are prepared to tolerate. One thing, however, is certain. Down that road there lies not the kind of Australia which all of us want for our children, but the kind of country of which we shall be ashamed to own ourselves as citizens.
Let us consider this matter a little further. The process whereby, throughout much of Australian industry, people -- however desperate may be their need for employment -- are denied jobs unless they can display a union ticket, is nothing more nor less than a form of "pass law". The fact that the "passes" are in this case issued not even by a legally elected government but by largely undemocratically elected -- or appointed -- trade union officials, only renders the system even more oppressive.
We hear a great deal about such pass laws in South Africa, where they are used for other equally oppressive purposes. I have no doubt how condemnatory of such laws our so-called Human Rights Commission would be were they to feel called upon to make statements about that topic also. Yet I do not recall seeing Dame Roma Mitchell and her by no means small supporting cohort of assorted zealots mounting their quasi-judicial chargers in the cause of what should be that most fundamental of all our freedoms -- the freedom of an individual to enter into a voluntary contract for a job with an employer, and the freedom of that employer to provide him or her with a job.
You might ask why I have spent some time now in spelling out what might be called these social, political or, if you like, civil libertarian consequences of the overwhelming power which, by now, trade unions and their bureaucracies have come to command in our society.
The directly economic short-run consequences are, naturally, obvious. The longer-run economic consequences would also probably be accepted by most thoughtful people. Those consequences include the stifling of private entrepreneurial activity and initiative; higher and higher unemployment; more and more proposals by the "big government" advocates to provide the jobs (or at any rate incomes) which the private sector is being strangled out of providing; dawning recognition that the combination of swingeing taxation and excessive governmental borrowings to which that in turn leads is itself a prescription for disaster; and growing despair that those problems in turn will ever be purposefully tackled by the kind of politicians who today purport to "represent" us -- on whichever side of the political spectrum.
Forfeiting of Talent
The real threat to Australia which these developments represent lies somewhat further down the track. A few months ago, in the course of a newspaper interview, I remarked that twenty years ago there used to be in Australia a kind of rule-of-thumb of medium-term economic forecasters, to the effect that if one wished to know where Australia would be in (say) five years' time, one looked at where the United States was today. I added, however -- and this is the point -- that today I have replaced that rule by a quite different one, namely that if one wishes to know where Australia will be in (say) ten years' time, one should look at where New Zealand is today.
I recall that comment in this connection because I vividly remember visiting New Zealand in 1979. Sir Robert Muldoon was then, and had been for some time, Prime Minister. New Zealand is a beautiful country of which, after my own, I have become very fond and with which I have had a close association for almost twenty years.
I still recall that, of all the many depressing conclusions which, at the time, I carried away with me, the one which I found most depressing of all related to the developments in New Zealand's immigration stream. In fact, that stream had by that time become, in net terms, an emigration stream. Everywhere I went I learned of young people -- many of them among "the best and the brightest" which New Zealand was producing -- moving abroad to make their careers in other lands (including even at that time, Australia). Those other lands seemed to hold out more hope, more excitement, more economic and hence personal freedom -- including not least the freedom to make a fortune without being assailed from all sides by "the politics of envy".
What struck me very forcibly at that time was that in this outflow of New Zealand's talent -- an outflow offset only in numbers by continuing inflow from the South Pacific -- I was witnessing a development which, if sustained, would inevitably lead to New Zealand "perishing". Down that road its future beckoned as a mere home for old people attracted there by its absurd -- and in those circumstances increasingly unviable -- National Superannuation Scheme.
The key point I am making is that we live today in a world where, increasingly, skills -- and in particular, brains -- are internationally transferable to a degree never dreamed of even (say) thirty years ago. I am not speaking here of a select few academic scholars, or members of some of the learned professions, who have in some degree enjoyed that access to international economic opportunity for decades past. The skilled English tool-setter who chooses to migrate to Stuttgart to work for Daimler-Benz is as much an example of the phenomenon I speak of as the Australian neuro-surgeon who, confronted by the increasing socialisation of medicine, chooses to find more gainful employment in the United States.
The "brain drain" is thus no longer a phenomenon afflicting the capacity for development of low-income countries in the so-called Third World. It is a phenomenon which is already beginning to afflict Australia. Unless policies (and policy-makers) in this country can be wrenched out of their ruts of complacency, it will afflict us much more severely in the years ahead. That is the real route which, if we continue to go down it, will lead to our "perishing" at the end of it.
The late Edward Owen Giblin Shann anticipated some of this some 55 years ago. In the preface to his fine work An Economic History of Australia, which he wrote here in the University of Western Australia, he drew out the longer-term consequences for the whole calibre of a country's national life flowing from Australia's then policy of industrial protection. Shann said:
The more the policy of a hermit Australia succeeded, the more surely would it bring slothful intellectual standards and, as a consequence, material decay, until with scorn, some. . . power from the world where necessity had maintained knowledge and energy knocked in the closed door. (emphasis added)
In some respects therefore, as that quotation indicates, what I have called the real threat to our national existence flowing from our over-regulated economic system does not represent a new thought. What is new about it, however -- apart from the fact that things in this regard have become so much worse since Shann wrote -- is that today the capacity for resources of skill and intellect to move internationally has become enormously enhanced by comparison with Shann's day.
Recently we have seen the way in which, today, the international financial markets can enact a terrible retribution upon the economy of a country such as Australia whose financial and economic policies have been weighed and found wanting. There are of course more impediments to the international transfer of resources of skill and intellect than there are to the international transfer of capital -- immigration laws, professional qualifications requirements, work permit systems, the ties of home, family and so on.
Nevertheless, while that international transfer process is necessarily slower and in that sense less dramatic than that which we see in the international financial markets, it does exist. It is to be witnessed in what some have termed the transport revolution -- not merely the greater ease and cheapness of physical transport across the world but also, and even more spectacularly, the international transport of information via communications satellites and the like. In those and other ways it has the capacity to grow apace. Certainly, it will have the most deleterious consequences for any country which allows itself to fall victim to it.
Lest there be any misunderstanding on this point, let me also say that I regard this as a hopeful development rather than one to be deplored. I am myself, and will always remain, an Australian -- indeed, a Western Australian, as I am still proud to call myself. Nevertheless, I can only welcome those processes which, directly or indirectly, place pressure upon our governments to review and reform the many anachronisms by which we have been too long beset in this country.
Chief among these anachronisms, in terms of the evil which it has for so long perpetrated -- and continues to perpetrate -- is our system of Conciliation and Arbitration tribunals. These tribunals continue to render full employment illegal by setting minimum wage rates and other conditions of employment which it is beyond the capacity of employers to pay while continuing to make a profit.
In addition these tribunals provide an enormously significant bulwark underpinning the power of trade unions. Neither their membership nor their modus operandi could be described as in any way judicial. Accordingly these bodies -- and certain of their members in particular -- gain for themselves high reputations as "conciliators" by leaning generally in that direction where they discern the greater power to reside -- namely, in the hands of trade unions. In doing so the dice are loaded ever more heavily against those who seek to provide jobs and to generate rising real incomes.
Having in mind our general theme of deregulation, I refer also to certain suggestions during the debate arising out of recent industrial relations developments in Queensland. In particular, it was proposed that the Federal Government should seek to outlaw the actions of the Government of Queensland by invoking the so-called external affairs power of the Australian Constitution to give legal force to some international convention or other produced by the International Labour Organisation (I.L.O.) in Geneva.
We have seen in recent times one, in my view highly dangerous, exercise of the external affairs power, in the Tasmanian Dams Case in the High Court. For these purposes let us assume (whether true or not) that everyone in this room approves of the outcome of that case, in terms of preventing the damming of the Franklin River. Nevertheless I would suggest that everyone in this room should be deeply concerned about the manner in which that outcome was achieved. It was achieved, you will recall, through the invoking of a Constitutional power which I do not believe was ever intended to provide the Federal government with powers to override State governments in virtually every field of endeavour merely by acceding to some international treaty, or even mere "convention", dealing with the topic. Acceptance of such a view spells, I believe, the death-knell of our Federal system.
The centralists -- the regulators -- amongst us would welcome that outcome. I on the contrary believe it to be vitally important that we do not go down that road. I therefore proffer a suggestion to the Opposition parties which they might consider prior to the next Federal election. That is that they should carefully develop, and test in public debate and discussion, an appropriate amendment to the Constitution on this matter. Such an amendment would effectively restrict the existing external affairs power of the Constitution to that narrow reading of it which I believe truly reflects not merely the intentions of those who framed it but also -- and more importantly -- the true wishes of the majority of Australians.
Let me conclude these remarks upon the ill effects of labour market regulation in Australia by referring to a recent study which examines the performance of those markets in comparison with those of another country in our region -- Japan.
The study in question is entitled Japanese and Australian Labour Markets: A Comparison of their Institutions, Structure and Performance and has recently been published as one in the series of Pacific Economic Papers under the auspices of the Australia -- Japan Research Centre. I should confess some personal interest in it. The author, Mr. Alan Henderson, is an officer of the Commonwealth Treasury -- although this paper is of course published in his personal capacity -- who recently returned to Australia after three years in our Embassy in Tokyo. About a year ago, when I passed through Tokyo in my then official capacity, I read an earlier draft of what was then an internal Treasury memorandum and was sufficiently struck by it to urge him strongly to seek its publication.
Time does not permit me today to convey to you the full flavour of Mr. Henderson's paper, which I strongly commend to you for more considered reading. Let me therefore merely quote to you some passages drawn from its "Concluding Comments":
Australia's performance in generating employment opportunities deteriorated markedly by comparison with Japan's during the 1970's. To account for this divergence it is necessary to look beyond this slow-down in output growth, since the latter was more pronounced in Japan. This analysis of the Japanese labour market reveals a decentralised system that is sensitive to trends in profitability and exhibits great flexibility in terms of both the structure of relative wages and the general levels of nominal and real wages. The institutional and structural characteristics contributing to this flexibility include a low degree of unionisation, company-based unions, a small government sector, synchronised annual wage negotiations, six-monthly bonuses accounting for more than a quarter of annual earnings, the absence of wage indexation, a flexibly administered minimum-wage law, and an export-oriented manufacturing sector that focuses the attention of key unions on international competitiveness.
The Australian wage system, by contrast, is highly regulated, centralised, unresponsive to trends in profitability and characterised by a rigid wage structure. A comparison of the two systems identifies this inflexibility as a key factor in the deterioration of the Australian labour market's capacity to generate opportunities for job seekers.
On the topic of youth unemployment in the two countries, also, Mr. Henderson's conclusions (which I shall not detail here) are well worth noting.
Financial Market Deregulation
I now turn to that third factor of production -- capital -- which I listed at the outset.
When the present Treasurer, the Hon. Paul Keating, released the Martin Report on financial market deregulation early last year he said:
It is essential that Australia possess a competitive, responsive and adaptive financial system, for this will provide the best basis for economic development and growth and for meeting community needs.
That is obviously true. Moreover, as I have said elsewhere, if true for financial markets, it is just as true for labour markets. They, too -- indeed, since they are the largest and most important markets in the economy, they especially -- need to be "competitive, responsive and adaptive". Unless they are, we shall not have the "best basis for economic development and growth and for meeting community needs".
But what of the capital markets themselves, now that the great bulk of the regulations previously governing them have been struck away? Eighteen months have now passed since the most important moves in that respect were taken. I refer to the suspension of virtually all exchange controls, together with the floating of the Australian dollar. I may be wrong, but I nevertheless hazard the speculation that, despite that passage of time, most Australians have as yet only a dim realisation of the new freedoms now available to them.
It is worth noting, in passing, that when Professor Shann was writing the words I quoted earlier, Australians possessed all of those freedoms in full measure. Anyone wishing to remit funds anywhere simply went to his or her bankers and arranged to do so. As to exchange controls, the ingenious Dr. Schacht (who is credited with first devising them) had not yet assumed his position of authority in the German Central Bank under the regime of Adolf Hitler. So in that sense the financial regulatory wheel has, in Australia, come full circle.
During that 55 year interval, however, other things -- and technology in particular -- have not stood still. Dissemination of information -- including instructions to bankers overseas -- was then much slower. We did have "runs on gold" but such financial flurries were usually long in building and could generally be dealt with by purposeful action by monetary "authorities" in whose apolitical integrity people still believed. Indeed, in many cases there were no such entities as "monetary authorities" in the form of Central Banks such as we know them today and the monetary response to financial flows fell for the most part to the private banking system. Perhaps there may be a lesson for us in that also!
Earlier in this address I referred to the way in which, increasingly, our resources of skilled labour -- workers both of hand and brain, as the Communist Manifesto has it -- can now "vote with their feet" if they find Australia an insufficiently rewarding venue for the exercise of their talents.
In the same way, all Australians can now vote with their financial feet. Any Australian can, if he or she is suspicious of the way in which our currency is being managed in Canberra and/or Martin Place, divest themselves of as much of that currency as is not required for current purposes and purchase an asset -- including merely a deposit in a foreign bank account -- denominated in Japanese yen, Swiss francs, Deutschmarks, the U.S. dollar or anything else which takes his or her fancy. Indeed, if so venturesome as to do so, he or she can borrow, against whatever security they may possess, in order to effect even larger "votes" of that kind.
The day is coming, therefore, when those seeking to marshal funds in this country for productive purposes will be competing for them not only against other Australian enterprises but against, so to speak, the world. Indeed, that day is already not far away. When it comes -- and this is the point -- it will be accompanied by a cold douche of realisation that our present approaches to such questions as productivity, profits and taxation do not equip us well for surviving in that wider world.
In a sense, the only thing which should be novel to us about this is that, until recently -- in the post-War period at least -- that kind of thing "couldn't happen here". Yet consider, say, Argentina, or indeed almost any of the other Latin American countries. For decades the citizens of those countries in a position to do so (and in most of those countries, there's the rub) have, either legally or, in most cases, illegally remitted the great portion of their savings to offshore "safe havens". That, after all, is the greatest single reason why so many of those countries have had to draw on the savings of foreigners for their own development, in the process piling up those mountains of debt of which we continue to read.
When we contemplate the way in which our economy is being ground between the millstones of government fiat on the one hand and trade union fiat on the other, we would do well to have those Latin American examples in mind. The lesson to be drawn from them is this: we must lift our economic game. Otherwise, the audience -- which in this case constitutes our national resources of skill and capital -- is going to melt away, either to participate in more rewarding economic "games" elsewhere, or merely to act as financial backers of those more rewarding "games".
I am reminded of that series of cartoons drawn during the first World War by the then celebrated British cartoonist, Bill Bairnsfather. Some of you may know them. One which attained a certain wider currency depicted Tommy Atkins and his comrade in their shell-hole in no-man's land in some part of the Somme. As the shot and shell whistle above their hapless heads and burst all around them, and one laments to the other upon the quality of their accommodation, the other replies "If you knows of a better 'ole, go to it".
* Secondly, we have now had some eighty-odd years of increasing rigidity and costiveness of our regulatory framework for determining wages and other conditions of employment. As a result, we have reached a point where it is increasingly obvious to most commonsense Australians that it is that regulatory framework which, today, is putting more and more people out of jobs and denying more and more would-be employers -- particularly the kind of small business men and women in this room -- the opportunity to provide new jobs.
* Thirdly, the opportunities for international mobility of skills and brains are increasing apace. Unless the regulatory framework of our labour markets -- not to mention the deterrent effects of high marginal personal tax rates -- can be broken down -- and quickly! -- more and more of our most capable human resources are going to seek their fortunes elsewhere, either by physically moving or by utilizing the exponentially increasing capacity for international communication. The consequences of any such development for the productivity of the Australian economy, and for the living standards of those who will still depend upon it, should be obvious.
* Fourthly, after a lapse of over forty years, Australians are now again completely free to vote also with their financial feet whenever they feel that their own country is being badly governed economically by comparison with some other country in which, they believe, their savings could more profitably be put to work.
* Should many of them decide to do so, we shall have, rather like the celebrated Mr. Hobson, two choices -- either to seek to go down the Latin American route by borrowing further from abroad for a few more years, or to face the economic music by accepting a sharp cut in our living standards. In recent years however we have already set our feet some way along the first path. While, therefore, as I have said elsewhere, there is a lot of ruin in a country like Australia, we would I think find that the first path led rather soon to the kind of blind ending in which, nowadays, the Argentinas of this world find themselves.
* The choice is ours. Either we can continue to close our eyes to the looming realities, or we can face up to them.
In addressing that choice we need to set aside our fears and welcome, rather, our opportunities. In the city of Oxford, close to Balliol College, there stands a monument to the martyrs of the Anglican Church, Bishops Latimer and Ridley, who in the reign of Queen Mary were burned for refusing to recant their faith. Those days are, I trust, behind us. Yet at this time in Australia's history, when the outlook seems less than brimfull of hope (to say the least), we might do well to recall Latimer's truly immortal words as, with the flames beginning to mount on their respective pyres, he sought to comfort Ridley:
Be of good comfort, Master Ridley, and play the man. We shall this day light such a candle by God's grace in England as shall never be put out.
If our country is not to "perish", Australians such as yourselves today -- and in the period ahead -- need also to "light such a candle" -- a veritable bonfire of controls and regulations -- as "shall never be put out". I wish you well in doing so.