Public Policy and Public Management Papers

Mark Bahnisch

Queensland University of Technology

Contesting the Public Good in Contemporary Australian Discourses of Public Organisation

Acknowledgements: I wish to thank Professor Roger Scott and Dr Gavin Kendall, both at Queensland University of Technology, for extremely helpful comments on an earlier version of this paper.

Biographical Note:

Mark Bahnisch lectures in Sociology in the School of Humanities and Human Services at the Queensland University of Technology, Brisbane, Australia and is conducting the full time doctoral research on which this paper is based in the Australian Centre for Strategic Management, also at QUT.

Abstract

All public organisations exist in order to provide a public good or serve a public interest, among other possible purposes. However, the way in which they do this differs according to how the public interest is conceptualised. This is a question of politics, and the resources of political theory can be usefully employed in order to investigate this question (Stretton & Orchard 1994). This paper argues that two key discourses of public organisations exist: the traditional public administration model and the new public management model. Both have underlying normative assumptions about the public interest which relate to how the public interest is conceptualised, the nature of human behaviour and the appropriate mechanisms for structuring public organisations. The purpose of this paper is to explore these questions with regard to political practice in Australia, where governments of both Labor and conservative persuasion have adopted variously inflected neo-liberal approaches to public organisation. Utilising a combination of discourse analysis and political theory approaches, this paper aims to uncover the normative assumptions of public organisational discourses, and relate these assumptions to the political theory literature on the public good, and the balance between public and private interests.

Introduction

All public organisations exist in order to provide a public good or serve a public interest, among other possible purposes. However, the way in which they do this differs according to how the public interest is conceptualised. This is a question of politics, and the resources of political theory can be usefully employed in order to investigate this question (Stretton & Orchard 1994). The argument of this paper is that this variable will affect two key aspects of public organisations. Firstly, discourses about the public interest will shape the structure of public organisations. Secondly, such discourses will determine the nature of the interface with the public whose interests are being served. This paper argues that two key discourses of public organisations exist: the traditional public administration model and the new public management model. Both have underlying normative assumptions about the public interest which relate to how the public interest is conceptualised, the nature of human behaviour and the appropriate mechanisms for structuring public organisations. The purpose of this paper is to explore these questions with regard to political practice in Australia, where governments of both Labor and conservative persuasion have adopted variously inflected neo-liberal approaches to public organisation.

At present, these two models co-exist in an uneasy tension, and writers are agreed that it is unclear whether the public administration model has been completely superseded by the new public management model (Hughes 1994; Dunsire 1995; Bradley & Parker 1999; O'Fairchellaigh, Wanna & Weller 1999). Both Hoggett (1996) and Stewart & Kimber (1996), reviewing public sector change in the UK and Australia respectively, found evidence of inconsistency in the continued salience of features of the classical bureaucratic model such as centralisation and moves to decentralised control through such mechanisms as quasi-markets and purchaser-provider splits. Dunsire (1995) argues that professional ethics such as those of doctors or educators in the public sector are being partially displaced by managerial concerns. More such contradictory findings could be cited, illustrating that the current position is one of transition (Hughes 1994), with aspects of both discourses existing in tension. Most authors are agreed that the traditional model is under great pressure from changes in the political economy, a shift in the role of the state, and the increasing ideological predominance of neo-liberalism in political discourse (Hood 1991; Bell 1997; Terry 1998). This paper aims to uncover the normative assumptions of public organisational discourses, and relate these assumptions to the political theory literature on the public good, and the balance between public and private interests.

Development of the argument

Firstly, I establish the context by a brief overview of recent changes in public organisational discourses, and trace their trajectories in Australia. This enables me to establish the basis for analysing the public administration and new public organisation models in terms of how they normatively conceptualise the public good. Next, I discuss briefly how political theory has developed methods of establishing the public good, in order to define this key concept which is central to my analysis. In this section, I suggest that unitary conceptions of the public good are untenable in modernity, and that there are several discourses of the public good which combine procedural norms with a weak value content which are related to the various discourses of public organisation. The concept of public and private interests is also crucial for the analysis, and this is outlined.

Having established the theoretical bases of the paper, I turn to its substantive content. I firstly discuss the public administration and public management discourses in terms of their normative assumptions of the public good. Particular attention is paid in this section to a critique of how new public management defines the public good, which I argue is contradictory given the assumptions this discourse imports from neo-classical economic theory.

From Public Administration to New Public Management

Hughes (1994) argues that a particular model of public administration was paradigmatic for much of the twentieth century, and that it is only now in the process of breaking down. He traces the origins of the traditional public administration model to the Weberian theory of bureaucracy, on one hand, and administrative reform movements of the late nineteenth and earlier twentieth centuries on the other. Dunsire (1995, 27-28) drawing on Stewart & Walsh (1992) admirably characterises the bases of this model as follows:

These principles coalesced with an organisational structure closely linked to Weber's ideal type of bureaucracy (Lane 1993; Hughes 1994) and to a reasonable degree of political and public consensus on which functions were proper to the public and private sectors respectively (Wise 1990; Minogue, Polidano & Hulme 1998). The model assumed a separability of political and administrative rationalities, which formed its normative basis (Pusey 1991). In very broad outline, (and it must be noted that the degree to which each of these principles were instantiated varied over time and place), this forms the outline of the traditional public administration model.

Certainly it is true that there are some common discursive elements to the organisation of administrative governance in Western polities, although these are necessarily differently inflected according to the particular state form and political culture of each country. For instance, in the United States, values of neutrality and an administrative rationality divorced from politics were articulated from a variety of sources such as the thought of Woodrow Wilson and the progressive movement (Stivers 1998). The development of an ethic of political neutrality in the US public sector was influenced by the spoils system that had gone before, and by its continued salience. At the level of political culture, Griffith (1998) has argued that many of the problems of co-ordination in the American public sector are a by-product of the salience of Lockean individualism in the US political and social tradition. By contrast, the British model of public administration was 'a paternalist, statist canon' whose 'leading values were equity, justice, impartiality and conscious uprightness, with liberty and participation relegated to representative organs' (Dunsire 1995, 28).

The particular inflection of the administrative model in the UK was related to its peculiar constitutional structure (Nairn 1998) and the continuing influence of traditional conceptions of British liberty on the values and methods of the administrative elite. Similarly, the more dirigiste French state which developed from origins in an absolute rather than a limited monarchy (Poggi 1990) lead to a continuing level of intervention by the bureaucracy in economic life higher than the norm in the UK (Parker 1999). In discussing the traditional public administration model, then, it is necessary to attend both to its common features and to the specificity of its development in Australia.

There is much agreement in the literature that Australia has combined a statist tradition with the structures of a liberal (rather than social) democracy (Castles 1988; Frankel 1992; Stilwell 1992; Beilharz 1994; Bell 1997). The policy paradigm in which political contestation took place has been variously characterised. Kelly (1992) refers to the 'Australian Settlement', other authors to the 'Deakinite settlement (Frankel 1992) or to the 'Domestic Defence model' (Bell 1997), or the 'Australian Way' (Smyth & Cass 1998). However this policy framework is described, the political economy literature argues that policy contestation took place within a paradigm where certain matters were regarded as settled by a 'historical compromise' (Hampson 1996). Broadly speaking, an interventionist role for the state in national development (Pusey 1991), the predominance of agricultural, finance and mining capital over industrial capital, redistribution of wealth through the award system, and a decommodification of wages were some of the key pillars of the policy consensus. While particular policy within these parameters was hotly politically disputed, its broad outlines were not, with conservative governments expanding the welfare state and supporting the arbitration system (Castles 1988). This policy paradigm influenced matters as diverse as the relative unimportance of proactive industry policy (Capling & Galligan 1992; Parker 1996) and the labourist separation of roles between industrial and political spheres for the union movement and the ALP (Bahnisch 1998).

In this context, public organisations had a legitimate role in national development and the universal provision of public goods and entitlements (Pusey 1991; Yeatman 1990). While the policy/administration dichotomy was certainly blurred in practice and the States had much more instrumental bureaucracies than the Federal service, it was recognised that public organisations had a role to play in formulating public policy for the public interest (Pusey 1991). Much debate about the place of public administration revolved around its responsiveness to the public interest, and the degree to which it reflected and represented the diverse publics of Australia (Pusey 1991). It was on the basis of such assumptions that a social democratic reform agenda developed in the 1970s and 1980s which coalesced with the managerialist transition under the Federal Labor government (Orchard 1998). This social democratic agenda sought to introduce equity and democracy into public administration as key normative values (Wilenski 1986) as well as increasing political responsiveness and creating 'a bias towards the promotion of social democratic innovation' (Wilenski 1980, 403). Pusey (1991, 164) sums up the normative values of the Australian public administration discourse:

'New public management' is a term of British origin (Grey & Jenkins 1995), enthusiastically adopted in Australia (Hughes 1994). As both Hughes (1994) and O'Fairchellaigh et al (1999) argue, its use goes beyond a terminological shift. Orchard (1998) demonstrates that it embodies a new approach to the proper role of the State. This shift reflects the shift of Australian political discourse from statist progressive-liberalism to neo-liberalism under the influence of globalisation, the economic and political crisis of the 1970s and 1980s (Bell 1997) and the particular vulnerability of the Australian economy's 'domestic defence model' to international economic forces (Capling et al 1998; Peetz 1998). I will argue later in this paper that this discursive shift also displaces the normative values of the traditional public administration model. Hood (1991, 4-5) summarises the features of the new model as follows:

1. Hands-on professional management in the public sector;
2. Explicit standards and measures of performance;
3. Greater emphasis on output controls;
4. A shift to disaggregation of units in the public sector;
5. A shift to greater competition in the public sector;
6. A stress on private sector styles of management practice;
7. A stress on greater discipline and parsimony in resource use.

This model has clear resonances with both the economic foundations of management theory and practice (Stretton & Orchard 1994) and a neo-liberal suspicion of state provision and bureaucracy more generally. The intellectual heritage of new public management comes from both public choice economics and management theory (Pollitt 1993; O'Fairchellaigh et al 1999). In the Australian context, Kimber (1997, 465) has usefully constructed a table of the characteristics of the model derived from statements relating to public sector reform under the Keating government. This table is adapted and reproduced below. A comparison with the core characteristics of the public administration model as identified by Dunsire (1995) and cited above reveals a shift away from a universalistic model of public provision and a privileging of both non-bureaucratic organisational structure (Yeatman 1994) and a normative role for the market in allocating goods. In fact, the new public management model reverses almost all of the core assumptions of the traditional model, indicating that a significant value shift has occurred in political discourse.

New public management Traditional public administration

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Contract employment Career service

Tenure - impartial, apolitical

Performance Merit

Multiple accountabilities Accountable to Minister and Parliament

Performance measures No 'bottom line'

Minister as customer Minister as authority

Customers, clients, stakeholders Citizens, beneficiaries, taxpayers

I have already noted that while there has been an international shift towards some form of new public management discourse, the model is inflected differently in Australia to other countries. In the Australian context, for instance, the degree of 'reform' differs from state to state and compared to the Federal public sector (Bradley & Parker 1999), and has accelerated since the election of the Howard government at Federal level (Orchard 1998). However, there are standardising forces such as the requirements of National Competition Policy (Ranald 1998), which ensure that each individual public sector is subject to some degree of managerialist reform. The model now articulated also builds on previous administrative reform efforts of State and Federal Labor governments in the 1980s and 1990s (Yeatman 1990; Orchard 1998). Its ideological content is clearly hostile to the statist traditions of Australia, and it represents part of the broader breakdown of the domestic defence model (Pusey 1991; Bell 1997). I stated earlier that this model co-exists uneasily with elements of the traditional model. The new public management model will be further elaborated when I come to assess both this discourse and the traditional public administration discourse in terms of their conceptualisation of the public good. At this point it is sufficient to conclude that the partial displacement of the traditional model reflects broader economic and political shifts and has significant implications for how public organisations serve the public good.

Political theory: conceptualising the public good, public and private interests

Beginning with Plato and Aristotle, the Western philosophical tradition has concerned itself with the question of how to live well in political society, and how political society can be organised so as to encourage the good life (Held 1970). We can distinguish between unitary and procedural notions of the public good. The first are prescriptive as between the public good and individual interest, basing this prescription on a strong teleological view of human nature and purposes. Such a view could be secular, philosophical or religious. For example, the Christian political philosophy of Augustine or Aquinas sought to structure political society to enable all its members to attain salvation through the Church (McClelland 1998). However, unitary conceptions of the public good became unsustainable with the secularisation of politics and knowledge attendant upon the Reformation and the Enlightenment. The rise of the modern state saw attempts to replace religious and philosophical concepts of the public good with the reason of the state, and this is reflected in Hegelian and conservative political theory. But processes of individualisation enhanced by the rise of market capitalism (Habermas 1989; Poggi 1990) rendered a consensus around such an idea increasingly problematic. Increasingly and particularly over the last century, political theorists have recognised that a unitary conception of the public good is untenable (Held 1970; Mouffe 1993). This is not to say that Marxist or conservative unitary conceptions do not persist, nor that religiously fundamentalist conceptions have recently grown in importance (Laclau 1994). However, the bases of liberal democracy, and indeed its recent fracturing as it comes up against the challenges of multicultural, sex and identity diversity and the rise of new social movements and the commodification of the public sphere (Habermas 1989), render the imposition of a unitary conception problematic (Mouffe 1993).

The shift from unitary conceptions of the public good necessitates the introduction of the concept of interests to clarify how the public good can be theorised. Interests and the good are not the same concept (Held 1970). Interest can be taken to refer to group or individual desires and preferences, while the public good is a norm which aggregates or transcends particular interests (Isaac 1987). The concept of the public interest has traditionally been invested with a strong or weak content, and normatively privileged over the particularism of private interests. It is only in the last few decades in the strand of American political science based on methodological individualism and behaviourist assumptions (Gunnell 1993) that the concept has been attacked as meaningless (Downs 1962;Dahl & Lindblom 1963). As I shall discuss later, the concept and validity of the public interest is now also called into question by public choice theorists, whose work has been an important contributor to the new public management discourse (Dunleavy 1995; Dryzek 1996). Since Aristotle argued that the public interest was determined through the active deliberation of citizens in the sphere of the polis, which was supported by but differentiated from the oikos where pre-political private interests ruled, the concept has been central to theorising about the nature of politics. Smith, for instance, clearly required a notion of the public interest to justify his thesis of the invisible hand, and indeed distinguished between the public interest proper to politics and the private interest of economics (Stretton & Orchard 1994). The normative assumption common to most of the political theory tradition, and shared by Smith, is that the public interest transcends the particularism of self interest, and that individuals are capable of regarding, and do regard the public interest as well as their private interest. It is this assumption which is denied by neo-classical economists, public choice theorists and some varieties of liberal theorists and politicians. This denial is extremely significant as it reverses the privileged order of public and private interests, defining the public good in terms of the liberty to pursue private interests (Hayek 1963). I shall argue later that this denial is marred by contradiction.

The notion of the public good entails as one of its core assumptions a distinction between spheres proper to both public and private interests. It is useful to briefly to review the history of this distinction in order to underline the fact that these understandings are subject to political and ideological change. Understandings of the public sphere have shifted historically (Habermas 1989; Eley 1992; Weintraub 1997). These understandings have (in part) been influenced by understandings of the political way in which public interests and values could be secured in order to define a public good existing over and above private interests and values which could be realised in the sphere of civil society (Weber 1948; Habermas 1989). This is important because it discloses that the boundaries of the public sphere are not themselves value free or ahistorically or universally true. Rather, the conception of the public sphere is intimately related with the political resolution of competing interests in private society (Calhoun 1992). Thus, the prevailing conception of the public sphere will be related (among other things) to changes in production and organisation in the economy, views on distributive justice, and contestation within civil society. Central to the argument of this paper is that the balance between public and private spheres, and the privilege accorded to public over private interests, are important, and that they vary over time (Weintraub 1997). It is important because it reveals normative political conceptions of the public good.

The terms public and private are first used theoretically in Aristotle's Politics to distinguish between the private sphere of the household from the public sphere of the polis or city. Aristotle's claim is that the private is pre-political, entailing patriarchal relationships of domination which provide the material (economic) ability for the citizen to act in the public or political realm. This distinction is important as it reveals the civic aspects of the public interest, and the fact that the private (ekonomia) is a hierarchically ordered and apolitical space. While the distinction fell into disuse in Medieval Europe, it persisted through the distinction in Roman Law between private and public dominion (Habermas 1989). The growth of capitalism and Enlightenment modernity led to a revival of the distinction as a way of both understanding and ordering society (Arendt 1958; Weintraub 1997). The public sphere became a space where the public good could be reconciled with (competing) private interests each with its own view on the public interest (Benn & Gaus 1983; Habermas 1989, Weintraub 1997). In both classical liberal political economy and politics, the private sphere was modelled on the Greek notion of oikos, as the space in which material interests would combine to produce the conditions for public life and public prosperity. Weber (1948) and Habermas (1989) have revealed the increasing conflation of the public and private spheres as capitalism advances into yet more spaces of society, which is increasingly differentiated and rationalised. The state and the economy increasingly penetrate each other, as the pure liberal model breaks down through both the commodification of social relations and the diversification of interests with the advent of popular democracy. Habermas’ argument is that the commodification of social relations which grew with the rise of modern capitalism accentuated the rise of self interest as the dominant rationality of the private sphere. He further argues that the increasing intervention of the state into the ‘private’ relations of the economy blurs the boundaries between pure public and private spheres. This conflation adds a further reason as to why a unitary conception of the public good is untenable in modern liberal democracies.

How then has recent political theory approached the problem of the good? As I mentioned above, there are still unitary conceptions with a strong normative content, such as the continuing discourse of Marxist socialism (Kymlicka 1990). But I have also argued that these are difficult to sustain, and of limited utility in analysing the public good in essentially liberal polities. The options for specifying the public good are competing procedural conceptions, and procedural conceptions with a weak normative content. I will argue later that the traditional public administration model is informed by a liberal procedural conception of the public good. Recent debates within political theory have centred on the justification of certain procedures or political structures which enable citizens to realise their own conceptions of the good life, or leave groups free to pursue such conceptions. The public good here is defined as a normative consensus which protects freedom and enables competing conceptions of the good to co-exist within certain minimal boundaries (Kymlicka 1990; Mouffe 1993). What is essential here is to define the public good procedurally as a constitutional or institutional structure embodying certain rights and deliberative norms which can balance public and private interests (Gaus 1995). This avoids adjudicating on competing normative conceptions of the public good, which are properly left to individuals or groups to resolve.

Much of this theorising takes as its starting point the work of John Rawls (1971) in A Theory of Justice. Rawls seeks to specify political, economic and institutional structures which allow for reasonable resolution of competing political arguments. In other words, he argues that the state must not decide what is in the private interests of its citizens, merely resolve the minimum issues necessary to ensure that the public interest is served. It is not necessary here to review in toto the debate around Rawls' work and his 'political liberalism'. The point that can be extracted from this debate which is salient for the present purposes is that Rawls has been criticised for presuming a weak version of the public good, a criticism which he accepts in Political Liberalism (1994). For instance, he favours a distributive allocation of wealth which would enable all citizens reasonably to realise their individual or collective goals. In common with other varieties of liberalism (Freeden 1996), Rawls proceeds from a standpoint of methodological individualism and the assumption that there is a standpoint from outside history and culture from which to assess the good.

The communitarian or civic republican theorists such as Taylor (1979) and Sandel (1982) argue that liberalism ignores the constitution of self within society, and that the state is justified in encouraging a particular conception of the good, which can be resolved by collective and political debate (Kymlicka 1990). Individuals' preferences are not innate, but formed in society, and are alterable in the process of rational political debate and action. Within this viewpoint, there are differences between some theorists who wish to specify how such debate should be conducted (Habermas 1984, Benhabib 1996) and others who have a particular conception of the good which the state should view as normative, a perspective associated with the largely US based civic republican theorists (Oldfield 1990; Goodin & Pettit 1997). Both these positions have been attacked, often by political theorists such as Mouffe (1993) who argue that they continue to assume unitary conceptions of the public good which are illegitimate in a society characterised by diversity and difference.

I have established in this section of the paper the fact that the public good can be conceived of either unitarily or procedurally. Procedural conceptions of the public good can nevertheless include weak normative prescriptions of the public interest. I have also argued that the public good can be decomposed into the balance and privilege accorded to public and private interests. My argument is that both the public administration and new public management discourses have implicit normative positions on the public good.

Public administration and New Public Management as discourses of the public good

Both public administration and new public management discourses rest on normative assumptions about the public good. Public administration came to be articulated as part of the modernisation and rationalisation of the state, as Weber's (1948) work makes clear. This is why neutrality and universality are key dimensions of the discourse. The separation of the means of administration from property held by persons was as Weber (1948) argues, an important contribution to the rise of legal rationality in administration. Accordingly, as well as being seen as efficient, bureaucracy in the Weberian form institutionalised the performance of public functions within a framework of rational rules. Thus, the public administration discourse embodies a procedural liberal concept of the public good. Rather than being subject to feudal or arbitrary forms of domination, citizens are treated alike on the basis of universal norms. The normative separation of administration from politics, however disconnected from reality it proved to be (Pusey 1991), creates an expectation that citizens can hold bureaucrats and public organisations accountable through the political process, while enjoying equal access to publically provided goods and services (Dunsire 1995).

Thus, public administration as a discursive practice avoids specifying a strong content of the good, disregards individual differences both in the members of public organisations and citizens, and embodies a norm of equality of access to services and public provision within rules established by the democratic process of politics. Self (1995, 343) suggests that the public administration discourse secured the public interest (which he understands as 'a regulative ideal' in Kantian terms) through the impartiality of public officers, the openness of government to public opinion and its neutrality as between private interests. He further suggests minimal substantive consensual goals such as the promotion of equal opportunity and the minimisation of wealth inequality. Self's specification of a weak consensual content to the public interest is interesting. There is no doubt that research into the public administration discourse in Australia such as Pusey's demonstrates that this discourse embodied such a consensual public interest framework within which policy could reasonably be contested (see also Bell 1997).

While some writers such as Hughes (1994) have argued that the public sector can no longer be organised along the traditional model, alternatives developed in Britain in the 1980s are suggestive of the value framework that the public administration model assumes about the public good. Stewart & Ranson (1988) put forward a number of principles which in their view were distinctive to, and should guide, public organisations. These principles included reformulating public organisational strategy as political rather than competitive, performance evaluation as concerned with values rather than quantifiable outputs, and the recognition that 'the achievement of collective values is the purpose of the public domain and not of other domains' (Stewart & Ranson 1988, 18). Stewart & Ranson's work, while partly a response to the discursive predominance of new public management in the UK context, is significant in that it spells out something that was elided by the administration/politics distinction: that the public interest is a politically determined interest. This perhaps becomes clearer when market rationality is opposed to what has hitherto been the non-market rationality of public organisation and the political process (Minogue, Polidano & Hulme 1998). In this sense, while open to appropriate contestation between various political interests, the dominant rationality of the public administration discourse has resisted the extension of market rationalities into all spheres of society, and thus been an instrument of decommodification, particularly with the 20^th century expansion of the public sector (Dow 1997). The distinct role and privilege accorded to the public interest over private interests in the public administration discourse is precisely what neo-liberal articulations of new public management discourse seek to overturn.

There is a consensus in the literature that the discourse of new public management draws on theoretical and ideological elements of public choice theory and management theory. In this paper, I concentrate on the public choice aspects of the discourse. It should also be noted that there is significant disagreement within the new public management literature about its nature, and that the degree to which authors working in this discourse consider political issues is also variant. Nor is public choice itself a unified field, although assumptions about the economic rationality of human behaviour rather than methodological individualism (which in principle can be adapted to a range of ideological assumptions) are predominant (Dunleavy 1995). However, in the main, it is true that new public management represents an economic perspective rather than the political perspective of public administration (Hughes 1994; Dunsire 1995; Haque 1996; Terry 1998; O'Fairchellaigh et al 1999), and this is in itself significant for the argument I am making.

In the words of one of its key adherents, public choice theory is simply defined as an application of the 'methodology of economics to the study of politics' (Mueller 1997, 1). However, all is not as simple as this seems. From the 1950s onwards, methodological individualism and behaviourist assumptions came to dominate American political science (Gunnell 1993), largely displacing the institutional analysis which still dominates in the British tradition (Rhodes et al 1995). Public choice certainly studies voting behaviour and other aspects of politics such as legislative coalitions on the basis of methodological individualism, but this is not enough to distinguish it from other positivist political science approaches. What is important is the application of the assumptions and methods of a particular variant of economics, that of neo-classical economics and particularly its Austrian and Chicago schools (Mueller 1990). Theorists such as Buchanan (1975) insist that all human behaviour is explicable by the assumptions of homo economicus, the 'rational egoist' calculating individual who maximises their utility under conditions of scarcity. While this assumption has been limited in the past to neo-classical economics, it is now extended by public choice and social choice theory to all domains of human behaviour, and Mueller (1997) makes ambitious claims about economics as displacing and replacing all other social sciences. Although this theory originally developed in response to the pluralist theory of interest groups in American political science (Downs 1956), it early made the theory of bureaucracy and public organisation one of its central concerns.

While the public choice theory of public organisation has been elaborated into increasingly complex mathematical models many of which draw on game theory, its starting assumptions about behaviour in public organisations flow unproblematically from its basic premise. Public choice theory joins with other individualist and liberal strands of political science in its rejection of any notion of the public interest. There are only individuals with private economic interests, although the theory has to theorise firms as acting akin to individual agents (Dunleavy 1995). While the allocative efficiency of the market ensures that the pursuit of individual interest maximises wealth and efficiency in the private economic sphere, this is not true of the public political sphere. Here the behaviour of individual bureaucrats becomes toxic, as they pursue their private interests through maximising the size of their budgets (Mueller 1997). In addition, politics becomes captive of 'rent seeking' collective vested interests such as unions and producer groups (Olson 1965, 1983). The answer to this pathology of the public is privatisation and the introduction of markets and quasi-markets into the public sector (Self 1993). Hood (1987, 147) suggests that public choice's normative assumptions underlie the following elements of new public management:

• A bias towards small-scale rather than large scale enterprise in public service provision;
• A bias towards performance contracting rather than direct labour;
• A bias towards multiple-provider structures of public service provision (preferably including rivalry among competing providers);
• A bias towards user charges (or at least earmarked taxes) rather than general tax funds as the basis of funding public services other than pure public goods;
• A bias towards private or independent enterprise rather than public bureaucracy as the instrument of service provision.

Self (1993), among other authors, argues that much of the new public management discourse derives its legitimacy from public choice analysis. The influence of its prescriptions can be seen in the key elements of new public management described above. There is an excellent literature which analyses and critiques the normative assumptions of public choice theory and its managerialist inflections (Stretton & Orchard 1994; Dixon, Kouzmin & Korac-Kakabadse 1998; Orchard 1998). Among other criticisms, the notion of the public interest clearly has to be reintroduced in order to ground the preference for markets and argue the case for political pathology and it is not clear how this can be established within the terms of the theory, except as an ideological assumption. Clearly also, public choice theory also denies the fact that markets are not 'natural' and are constituted within society and through political contestation (Polanyi 1944), a denial which is necessary to maintain its unstated ontological premisses. Even at the broader level of the methodological individualism of economic analyses of politics and organisations, O'Fairchellaigh et al (1999, 37-40) argue that an individualist epistemology has difficulty explaining the complex, intersubjective and collective decision making processes of politics as compared to markets.

What is important for the argument in this paper is that public choice theory leads new public management discourses to privilege the private interest over the public, and to a methodological suspicion of any allocative mechanism other than markets. New public management suggests the advantages of non-bureaucratic forms of organisation often through quasi-markets and contracting (Hoggett 1996) and constitutes citizens as clients or consumers subject to differential service provision rather than universal provision (Haque 1999). Despite its positivist veneer, the public choice literature and some of new public management discourse influenced by it, privilege private interests over public interests. Equally importantly, the public choice paradigm contributes to a displacement of the political process into the economic (Dryzek 1996), and encourages scepticism about the efficacy of politics as a means of determining the public good (Yeatman 1990). Although I would again emphasise that there are different articulations of new public management discourse, the public choice version is closely linked to an unexamined neo-liberal content. In some ways new public management embodies a procedural concept of the public good in its normative preference for markets, it also follows neo-liberalism as a totalising ideology (Mouffe 1993) by an often unspoken reduction of the public good to the economic values of market capitalism. In this, it has affinities with other liberal discourses which tend to collapse the political into the economic (Mouffe 1999). In Dow's terms, new public management discourses privilege the (re)commodification of the public sphere as central to the public good.

Towards evaluating public organisations in terms of conceptualisations of the public good

I have argued in this paper that politics matters in the study of public organisations. The paper has argued that a discursive shift is underway, and that discourses of public organisation embody normative conceptions of the public good, understood as either procedural or substantive means for balancing public and private interests. The significance of some forms of new public management discourse is that they privilege private over public interests, which has significant ramifications for organisational structure, the way in which services or public goods are provided universally or particularistically, and for the contribution of public organisations to the public good.

I have argued that public organisations exist to serve the public interest or good. However, the way in which they are structured to achieve this end differs according to particular political discourses which embody normative assumptions about the nature of the public good. I have argued that two such discourses can be identified: the traditional public administration discourse and the new public management discourse. What is clear from the theoretical and empirical literature is that public organisations are in a state of transition, poised uneasily between these normative discourses. It is widely agreed in the literature that it is yet unclear whether in fact the transition to the new public management discourse is complete. In this way, discussion can also be stimulated about the normative bases for a discourse of democratic administration which would represent a genuine ‘third way’ beyond traditional and neo-liberal discourses of public organisation and reintegrate the public interest with public administration.

Paula Cowan

Griffith University

FROM IDEALISM TO PRAGMATISM. A SNAPSHOT OF WORKERS’ COMPENSATION LEGISLATION

Ushered in on the wave of political idealism by the T.J. Ryan government, the Queensland Workers' Compensation Act was innovative and exceptional for its time. The Act was unique in that it established a State Insurance Office that was given a monopoly in respect of all state workers' compensation insurance; insurance of workers was obligatory for employers; payment of compensation was provided for on a much more liberal scale than under previous legislation and workers retained full access to common law. From the point of its introduction in 1916, until its regeneration as the Workcover Queensland Act in 1996, the legislation was subjected to 75 amendments. These amendments reflect the loss of an initial political idealism - replaced by political complacency that developed during Labor’s lengthy reign from 1915 to 1929 and 1932 to 1957, and continued through the ensuing period of conservative government. During this period, governments were slow to recognise new occupational categories that left many workers ineligible to claim. Monetary benefits were also left to languish below cost of living levels. The ‘no-fault’ basis of the legislation remained, as did full access to common law and government monopoly insurance. However the insurance monopoly facet has come under pressure at times. The return to power of a Labor government in 1989 was not accompanied by any resurrection of the political idealism of the Ryan era. Instead, during the 1990’s, increasingly pragmatic decisions by both Labor and conservative governments have attacked all key areas of the legislation, leaving both employers and employees discontented with the result.

This article sets out to sketch the course of workers' compensation legislation through patterns of political idealism to pragmatism. After discussion of the initial event that led to this legislation, this article will argue that, although the content of the legislation has continued to maintain the ideal that workers should be compensated for work-related injury and illness, progressively more pragmatic decisions of successive governments have eroded aspects of the legislation. This has left workers' compensation, as a policy issue, in a precarious position. The erosion of the legislation has occurred for two reasons. The first reason offered is that the tradition of stable government in Queensland bred complacency. However, the instability of governments during the 1990’s made the legislation more vulnerable to pragmatist decisions aimed at short-term economic and political results. Secondly, a penchant for these types of solutions increased during the 1990’s, as governments adopted broader economic liberalist doctrines in line with global trends. For workers' compensation legislation this has meant a ‘toughening-up’of claim eligibility and increasing restrictions on access to claims as a means of reducing payouts. In particular, these mechanisms are a direct assault on social characteristics of the legislation, as areas such as equity in access to benefits, and the ‘no-fault’ principles of the Act are undermined.

Idealism

As labour became organised and mobilised in Australia at the close of the nineteenth century, tensions heightened between society’s continued promotion of industrial production, and a need to assist those incapacitated for work - particularly to compensate them for any losses incurred in the pursuit of that work. The state was forced to intervene in order to manage the tension over this issue, as it was in other areas of industrial dispute. While some workplace issues, such as improved factory legislation and recognition of trade unions were examples of labour reform, workers' compensation stands out as a key issue of social welfare reform as well. In particular, it provided an early attempt at a large scale social welfare scheme.

In Queensland, early attempts by conservative governments to address these tensions failed. Initial intervention came in the form of the Employers’ Liability Act introduced in1886, and the Workers' Compensation Act in 1905. Conservative governments, anxious not to incur unnecessary financial burdens upon capital, introduced both pieces of legislation. In effect, these were simply weak attempts to enact legislation in the hope that employees would be appeased, and employers not unduly inconvenienced. Consequently this legislation was more symbolic than effective. Neither piece of legislation was able to decrease the volume of injuries that occurred, nor alleviate the financial hardship incurred by workers and their families as a result of work-related injuries or deaths (Cowan:1993).

The election, in Queensland, of the Ryan Labor government in 1915 was significant. In office, it embarked upon a radical reform program that included controversial issues such as conscription, abolition of the Upper House, establishment of a conciliation and arbitration system, introduction of state enterprises and a ‘no-fault’ system of workers' compensation. By and large, the government embarked upon a policy program that focused on addressing issues of concern to the working classes. As a part of this program, the development of workers' compensation legislation at this time owes much to the idealism of the Ryan government. As Murphy (1978:p283) notes:

Armed with the experience of injured workers and families being left largely unprotected, primarily through unscrupulous actions of private insurance companies, the Ryan government was determined to monopolise workers' compensation insurance and exclude private insurance companies. For the government, the ideal of a central fund, paid for by industry, that provided automatic payments to workers for injuries sustained at work was paramount. In line with Ryan’s commitment to humanitarian issues, the legislative focus on the ‘no-fault’ component of the legislation was intended to halt the exploitation of workers at the hands, not only of employers, but of the courts and legal profession as well. While retaining access to the common-law court system, the ‘no-fault’ component of the legislation provided injured workers with an alternative to the inequities the justice system inevitably brought (Queensland Parliamentary Debates:1915).

The new measures sought to overcome other problematic limitations that were contained in the Employers’ Liability Act and the Workers’ Compensation Act 1905. For example, this new legislation expanded considerably the terms of ‘employer’ and ‘worker’ that had been especially difficult in previous legislation, as narrow definitions excluded significant numbers in both categories from those Acts . For workers, this had always been at issue, as occupations such as domestic servants, miners and permanent casual workers had no access to workers' compensation under previous Acts.

In a move to make this legislation the exclusive statutory mechanism for workers' compensation, the Employers’ Liability Acts and the 1905 Workers' Compensation Act were repealed, along with avenues of appeal to any other relevant acts, such as the Factories and Shops Act. Access to common law remained, which provided injured workers with a choice of accepting specific sums in line with statutory provisions, or opting to take legal action against the employer in an effort to increase compensation. Both avenues of claim were to be funded through the central insurance fund with no additional cost to workers or employers.

The most far reaching provision within the Act was the allocation of funds to set up a government-run insurance company which would hold a monopoly for work-related injury insurance in this State. Previous legislation had provided for insurance through private insurance companies. The area proved very lucrative for insurance companies as they developed a habit of challenging most claims in the courts. Injured workers with little or no income were unable to proceed, and most claims were resolved in favour of insurance companies. Successful claims were often not paid as insurance companies then sued employers who, in turn, could be forced into bankruptcy as a result of the insurance company’s actions (Cowan:1993). Overall, this legislation was built upon an ideal of income security. It was intended to provide compensation for as many workers as possible, under as many circumstances as possible.

Complacency:

Labor’s idealism remained throughout its early years in parliament and there was reasonable expansion in workers' compensation legislation. In December 1916, the Act was widened to include mining diseases in the scale of compensatable injuries. In 1918, jockeys and sharefarmers were added, and in 1919, the Table of Industrial Diseases was temporarily extended to cover death from the Spanish Flu epidemic that was affecting the State in that year. This last amendment focused upon coverage for hospital workers, ambulance attendants, quarantine officers and the general public who were eligible to be covered voluntarily under the scheme. Employer premiums adequately covered claims, and the scheme remained self-funding.

The 1920s brought a change in government priorities. After World War 1, Labor’s emphasis shifted from pre-war social experimentation, to a concentration on material development (Jordan:1980:p326). Social aspects of workers' compensation began to take a back seat. As changes were increasingly monetary based, quantitative measures were highlighted. For example, in 1925 the total sum payable for mining diseases was increased from 400 pounds to 450 pounds, and timber workers were included in the definition of ‘contractors’ under the Act.

By 1926, the State was in financial difficulties as economic pressures intensified and problems associated with a two-year drought became the focus of government attention. There was growing conflict between the parliamentary Labor Party and militant trade unions. This combination spelled the end of the Labor administration in 1929, with the government seen as "tired and stale" (Kennedy:1978:p368). The initial Labor program that was set by Ryan in 1915 had been fully implemented, but in some instances, for example, areas of state enterprises, there had been program reversals which had alienated some Labor supporters (Kennedy:1978:p368). Workers' compensation had survived, however its level of importance on the political agenda was diminished. Essentially, the ‘problem’ of workers' compensation was seen to be solved with the introduction of Ryan’s Act.

In 1932, Labor was again in government. However, by this time there seemed to be a lack of concern for health and welfare matters generally. Employment and wages issues dominated the party. For workers' compensation this meant changes were increasingly focused on monetary benefits. For example, the Act was amended in 1943 to provide benefits at a level of two-thirds of the basic wage. It was amended again in 1949 to increase benefits to a level of 75% of workers’ average weekly earnings. Payments for wives and children of injured workers were also increased. At the same time, areas of social welfare, such as occupations and types of illnesses covered, were neglected. By 1957, when Labor lost office, weekly workers' compensation payments were among the highest in Australia, yet the State basic wage was lower in Queensland than in any other State (Murphy:1980:p266).

Fitzgerald and Thornton (1989:p164) argue that after the initial objectives of 1915 were achieved, Labor’s priority became its longer-term survival in office to consolidate reforms already made. They suggest attempts to re-kindle the initial reformist idealism of the Ryan government were defeated at Labor-in-Politics Conventions, as Party leaders insisted on policies perceived as acceptable to the electorate. In relation to workers' compensation, government neglected to maintain regular assessment of the broader functions of the scheme. As such it remained relatively free of public scrutiny.

The change in government in 1957 began an era of Country (later National) and Liberal Party administration. Government by the non-Labor parties continued for the following 32 years. Emphasis for much of this time was on rural subsidies in relation to transport, power and irrigation. There was less emphasis on areas such as welfare, education and public health for example (Cribb & Murphy:1980:p13). This stability of government, both Labor and Non-Labor occurred, is attributable to an avoidance of contentious political issues (Cribb & Murphy:1980:p10). Cribb (1980:p269) argues that, during this time, economic development in Queensland was not accompanied by any concern for social change. As Hughes (in Cribb:1980:p269) points out, Queensland politics came to focus on "..things and places rather than people and ideas".

In line with these observations, workers' compensation remained focused on economic issues. For example, in 1972 the legislation was amended to bring weekly benefits into line with full award wages, and rehabilitation mechanisms were introduced in 1973. It is noted that the latter was introduced, not out of any commitment by government to the future well-being of injured workers. Rather the motive of the legislation was aimed at simply getting workers back to work as early as possible so as to decrease the length of time of benefits payments. However, the majority of amendments involved administrative changes to the scheme, for example the introduction of Medical Boards in 1962 (Workers' Compensation Act : Amendment No. 29:1962).

The lack of preparedness to address certain types of issues was obvious. One such area was that of asbestos-related diseases. From the late 1960s there were very clear indications that increasing numbers of workers were affected. It was also apparent that the problem would worsen in the future, yet government refused to address this issue in any serious way. By way of contrast, Miners Phthisis, a similar respiratory disease to asbestosis, had been addressed very early during the Ryan administration, and included in the legislation. Similar situations arose with the increases in occurrences of repetitive strain injury, and, during the 1990s, stress. In each instance, government was slow to give legislative recognition to the point where Queensland was often the last State to amend legislation. There was also a reluctance to recognise casual workers in this legislation, despite the growth in this type of employment.

The point is made by Wear (1993:p25) that during the era of stable government, there was erosion of what was essentially class-based ideologies of both major parties in Queensland. Upon its election in 1989, the Goss government’s priority was to "...avoid antagonising those who were likely to be hostile, rather than satisfying all the demands of their own constituency" (Stevens and Wanna:1993:p4). Central to this priority was the need to be economically responsible. By basing success on economic responsibility, the government resorted to a measure of political pragmatism in policy decisions.

Pragmatism

In political terms, the 1990s began in a similar fashion to 1915 - that is with the election of a Labor government after a long period of conservative rule. There was some anticipation from particular community sectors that the ‘spirit’ of idealism would again figure in government policy (Stevens and Wanna:1993:p2). Like Ryan, Premier Wayne Goss was to an extent, able to unite Labor Party factions, and had a relatively large measure of support within the Party. However, the Labor Party was itself no longer identified primarily as championing causes related to workplace issues. The class-based political divide of the Ryan era had long since dissipated, and in its place was a political party with a clear understanding that electorate support was gained by appealing to broader sectors of the community. In garnering wider support, the Labor Party tempered its ethos of working-class idealism, which required decisions that were pragmatic in form. In broader terms, the government embraced reform both economic and political. There was a commitment to public sector performance evaluation, and a strong emphasis on economic development in line with global trends.

The 1990s were the most significant decade for workers' compensation since its inception in 1915. In similar fashion to the early years, there were incremental changes made to the legislation each year up to 1997. Initially, the amendments were somewhat innovative. For example, recognition of de facto relationships in relation to claims was reduced from three years to one year. Coverage of casual employees in relation to mining diseases was introduced, and treatment by podiatrists, speech therapists, psychologists were added. As well, basic levels of benefits were increased and employer premiums were reduced (Workers' Compensation Act:1990-1995).

However, by 1995, the Goss administration having lost its parliamentary majority, was governing as a minority government, and facing a by-election in the seat of Mundingburra. Failure to win the seat would see the government forced to relinquish office. Into this mix came a deficit in the workers' compensation fund of approximately $118m. for the 1994-1995 financial year. An Actuaries Report pointed responsibility for the loss directly at the steady increase in common law claims over the previous few years. However the report clearly stated that, while the increase could be attributed to a growth in the numbers of common law claims at the lower end of the scale, changing the laws to limit access at this level would make no difference. In effect, there needed to be broader limits placed on common law access, the most extreme of which would be the abolition of common law access altogether. Queensland was the only State that had, to this point, retained full common law access – a point that had always held importance as an issue of social justice. While the fund had remained economically sound, successive governments saw little reason to address the issue. However, to win the by-election required blue-collar support, therefore attacking common law access at this time was not politically sensible.

Instead, the government introduced changes to the legislation based on increased statutory benefits, so as to encourage injured workers to accept statutory benefits, rather than institute common law proceedings. Employer premiums were increased and they were to pay an additional 10% surcharge for the following five years, until the fund was stable. Employers were also required to pay the first five days wages to injured workers – a component of early legislation that Ryan had abolished. The pragmatism of these decisions is a reflection of the Goss government’s approach to economic management. It also suggests a desire by the government not to upset its electorate base in light of a vital by-election.

However, such pragmatism is not the domain of the Labor Party alone. Having won the Mundingburra by-election in 1996, the Borbidge Coalition government also showed its propensity for political pragmatism in relation to workers' compensation. After taking office, the Borbidge government commissioned the Kennedy Inquiry, whose brief it was to look into workers' compensation and ‘related’ matters in Queensland. The key recommendations of the Inquiry were that common law access should be allowed for moderate to serious injuries only. Effectively, the Inquiry recommended closing access to common law for less serious injuries – the category into which a high proportion of injuries fall. Among the other 78 recommendations were the abolition of journey and recess claims and that injured workers have only 42 days after injury to institute common law proceedings (Kennedy Report:1996:xii-xvi).

As a minority government, the Borbidge administration was dependent upon the support of the independent member for Gladstone, Liz Cunningham. Mrs. Cunningham indicated she would not support the limitations to common law that were pivotal in the report (QPD:1996:p3846). As a consequence, the legislation was amended, in line with the Kennedy Report, but without its key recommendation. In the parliament, the Minister for Training and Industrial Relations (QPD:1996:p4457) defended these decisions. He stated:

The Borbidge government desire not to be challenged on the floor of the House led to amendments that the Minister acknowledged would not halt the blowout in costs that were troubling the fund (QPD:1996:p.4457), and that the Kennedy reform package had been compromised to a point where it would probably be a case of "too little – too late" (QPD:1996:p4458).

At this point it seems the political idealism that ushered in the Workers' Compensation Act has been replaced by pragmatism that produces decisions in this area the motives for which are political and economic expediency. In setting these parameters, government has succeeded in restructuring a piece of legislation whose origins lay in the need to protect and provide for those incapacitated, into an economic mechanism to be manipulated as markets, and political events dictate.

Conclusion:

This paper is part of a preliminary investigation of changes to workers' compensation legislation. At this juncture, the paper utilises the conceptual framework of political idealism, complacency and pragmatism to trace development of the legislation, and provide some explanation as to why, during the 1990’s, both major political parties have attacked key features of the legislation. Features such as ‘no-fault’ mechanisms and full common law access, were reflections of the idealism that contributed much to the legislation’s initial success, and subsequent governments were not inclined to make any changes in these areas of the Act. However, economic and political pressures faced by governments during the 1990s led to pragmatic responses when addressing problems in this area. As a result, the key components of the legislation have now come under attack. In part, this pragmatism can be attributed to the instability of government in Queensland during the 1990s, and has led to changes to the legislation that, once again, threatens to increase the financial hardship incurred by workers as a result of work-related injuries or deaths.

BIBLIOGRAPHY:

Cowan P., 1993, Workers’ Compensation Legislation in Queensland 1886-1916. Meeting the Interests of Courts, Employers, Workers or the State? Honours Thesis.

Cribb M.B., 1980, "Stability and Change" in Politics in Queensland 1977 and Beyond, Cribb M.B. and Boyce P.J., eds., University of Queensland Press.

Cribb M.B. & Murphy D.J., 1980, "Winners and Losers in Queensland Politics" in Politics in Queensland. 1977 and Beyond, Cribb M.B. and Boyce P.J. eds., University of Queensland Press.

Jordan P.K., 1980, "Health and Social Welfare" in Labor in Power. The Labor Party and Governments in Queensland 1915-57, Murphy D.J., Joyce R.B. and Hughes C.A. eds., University of Queensland Press.

The Kennedy Report. Report of the Commission of Inquiry into Workers' Compensation and Related Matters in Queensland. 30.6.1996.

Kennedy K., 1978, "William McCormack Forgotten Labor Leader" in Queensland Political Portraits 1859 – 1952, Murphy D.J. and Joyce R.B. eds., University of Queensland Press.

Murphy D.J., 1978, "Thomas Joseph Ryan. Big and Broadminded" in Queensland Political Portraits 1859-1952, Murphy D.J. and Joyce R.B. eds., University of Queensland Press.

Murphy D.J., 1980, "State Enterprises" in Labor in Power. The Labor Party and Governments in Queensland 1915-57, Murphy D.J., Joyce R.B. and Hughes C.A., eds., University of Queensland Press.

Queensland Parliamentary Debates (QPD). 1915 – 1996.

Stevens B., and Wanna J., 1993, "The Goss Government: An agenda for Reform" in The Goss Government. Promise and Performance of Labor in Queensland, Stevens B. and Wanna J., eds., Macmillan.

Wear R., 1993, "Wayne Goss- A Leader in the Queensland Tradition?" in The Goss Government, Stevens B.and Wanna J., eds., Macmillan.

Workers' Compensation Act 6 Geo.V. No. 35 1916

David Hayward & Ron Aspin

Swinburne University of Technology

Contracting Out: Time for a Policy Rethink?

Abstract

This paper assesses the claim that contracting out leads to efficiency and effectiveness gains, which in turn help Australia to compete globally. Using two case studies – contracting out of prisons and public transport – we show that it has not led to the improvements that were promised. In both cases, costs have not fallen in the way they were meant to, and effectiveness seems to have declined. By enthusiastically contracting out activities, state and federal governments have offered new business to global corporations, some of which dwarf them in size and economic power. These multinationals are increasingly forming global alliances in order to secure new sources of business in heavily concentrated markets for outsourced public sector activities. Rather than being a consequence of globalisation, contracting out appears to be a major cause of it.

Introduction

Of the various forms of privatisation, contracting out has always had the potential to be the most far-reaching in its breadth and effects. As a principal consultant at KPMG recently said: ‘If it is done well, anything can be outsourced’ (Public Accounts and Estimates Committee 2000:37). Australian governments have increasingly used it as their favourite policy tool. The former Head of the Victorian Cabinet Office put it this way: ‘The presumption is [now] one of outsourcing rather than one of services being delivered…that generally the private sector should perform functions unless there is a reason the government should do it’ (Public Accounts and Estimates Committee 2000:36).

At its heart is the capacity to contract out to private companies almost everything that governments do, from specific activities such as catering or cleaning within organisations, through to whole functions such as public transport. Over the last 15 years it has enabled governments to take the private market deep within the public sector, so much so that almost nothing has proven to be impervious to it. Areas many might have thought ‘safe’ such as prisons, detention centres and prisoner transport have proven to be unusually fertile ground.

Estimates of the full extent of contracting out are very difficult to come by, which raises questions about the degree to which governments have embraced a policy instrument without having set up the necessary measures and procedures to properly evaluate its effectiveness. The Industry Commission (1996:59) estimated $8 billion for the Commonwealth public sector and $3.3 billion for the states, while local government contracting out may have reached $2 billion. We know contracting out has mushroomed since then, courtesy of its enthusiastic promotion by the Kennett government in Victoria which oversaw a fivefold increase in its first term and mandated that 60% of local government expenditures be compulsorily contracted out (Public Accounts and Estimates Committee 2000). The Howard Commonwealth government has also actively encouraged it, but we do not know the extent to which this has translated into new contracts.

This reflects a major shift in the theory and practice of public administration, profoundly influenced by neoliberalism and its intellectual off-shoots in the form of public choice and agency theory (Considine & Painter 1997; Alford & O’Neill 1994; Davis & Wood 1998). Also influential has been the work of Osborne and Gaebler (1993). A key protagonist in Australia was Simon Domberger, whose empirical work on the cost implications of contracting out has been extensively quoted by policy and political groups keen to promote privatisation here, as reflected in the convenient summary of available Australian research in the Industry Commission’s report (1996:Tables B2.1, B3.2). Domberger and Hall (1995:1) summarise the three main arguments:

A further argument is that that contracting out is essential if Australia is to remain competitive in the face of globalisation; by keeping costs down, government has less need to raise taxes and/or has the capacity to redirect scarce funds to more urgent areas (Rimmer 1998). The Industry Commission (1996:49) went further, arguing that the impetus for reform lay not just with international pressures, but also an expectation by citizens that their governments could do better:

This paper critically examines these claims by focusing on two case studies involving significant and large-scale programs in which there is a significant body of secondary data: the contracting out of corrections and detention facilities, and the privatisation of public transport systems. Both case studies have a strong focus on the Victorian experience simply because contracting out has gone furthest in that state and because reviews of its effects are becoming increasingly available.

Prisons and Detention Centres

Up until 1990 all of Australia’s prisons, detention centres and prison transport operations were under public ownership and control. Over the last decade Victoria, New South Wales, Queensland, South Australia, Western Australia and the Commonwealth have contracted out parts of their correctional facilities. In 1997-98 over 15% of the Australian prison population were held in private prisons (Australian Institute of Criminology 1999). Their capacity as at February 2001 was 2,998, with a further 750 due to come online with the opening of Acacia Prison in Western Australia. Victoria now has almost half of its prisoners in private jails. Its remand centre is also in private hands, as well as prison transport and all prison health facilities (Kirby Report 2000).

There are four main private contractual operators of Australia’s correctional facilities: Australasian Correctional Management Pty Ltd (ACM), Australian Industry Management Services (AIMS) (formerly Corrections Corporation of Australia (CCA)), Group 4 Corrections Services Pty Ltd (Group 4) and Management and Training Corporation (MTC). ACM appears to have the lion’s share, managing all six Department of Immigration detention centres and associated transport services, three prisons, the Melbourne Custody Centre and health care services in nine Victorian prisons. Key data on each of these companies is shown in Table 1.

Table 1

Key Features of Private Prison Companies Operating in Australia

Sources: Company Annual Reports; http://web.crim.ufl.edu/pcp/census/2001/Market.html

The international evidence on cost savings is mixed. In her meta-analysis of the available research, Schneider (2000:209-10) concludes:

The Australian evidence is also, at best, mixed. The Queensland government – the first to move to private prisons – has flagged its intention to have greater ministerial control in future contracts. This was based on a review which among its findings concluded that there were inefficiencies in the current purchaser/provider model, which created a fictitious profit. Part of the cost efficiencies resulted from prisoners being doubled up in cells and inadequate levels of supervision. Since this report, the contract for management of Borallon Correctional Centre has expired and AIMS who built and managed the prison since 1990 lost the management contract to MTC (OPSEU 2000a). In Victoria, the available evidence is also not favourable. The private prisons have consistently had higher operating costs than the public prisons, although the gap has narrowed considerably (see Table 2). Privatisation of health management within Victorian prisons has also been a costly exercise (Kirby Report 2000, vol.2:84).

Table 2

Annual Average Direct Cost per Prisoner, Victoria, 1996-97 – 1998-99

Source: Audit Review of Government Contracts 2000, Case Studies:49

A number of researchers have drawn attention to the limitations of these official figures. The Kirby Report (2000:34) summarised the criticisms very well as they apply to Victoria:

Some have made the point even more strongly, noting that it is possible for a prison to ‘excel in terms of those benchmarks and still run an appalling prison’ (Haermeyer, quoted in Kirby Report 2000:35). The effectiveness measures are at best partial and at worst misleading.

The available data show a decline in the effectiveness of the Victorian prison system. Port Phillip Prison, owned and operated by Group 4, has been in the spotlight of controversy since before it opened, due to its failure to design out ‘hanging points’ during the construction phase as recommended by the 1991 Royal Commission into Aboriginal Deaths in Custody. From its opening in August 1997 until late 2000 there were 15 deaths: five by hanging, three alleged drug overdoses, one alleged self-mutilation and five alleged natural causes. There were nine attempted suicides during 1998-99. A coroner’s report (cited in OPSEU 2000a) found Group 4 lacking in management information, experienced staff, training, auditing and implementation of emergency procedures and cell design. The coroner was critical of Port Phillip’s management because Group 4 had experienced similar problems in new prisons in the UK and elsewhere.

ACM has also had problems. In 1996 Justice Healy of the Queensland District Court found that the company was responsible for unsafe working conditions, which led to a former employee developing post-traumatic stress syndrome. Amongst the factors that contributed to this was understaffing (Moyle 1997). It was revealed to the court that the Queensland Corrective Services Commission did not have an adequate monitoring system in place to ensure that ACM met its contractual obligations. As Moyle (1997) points out:

In Victoria, a riot at the Fulham Correctional Centre in 1999 was prompted by overcrowding and required the use of teargas to regain control (Audit Review of Government Contracts 2000). Two men suffered severe physical attacks by other prisoners while being held at the Melbourne Custody Centre, with one left severely disabled as a result. Relatives are suing for damages on the prisoner's behalf (Age, 1 June 2001).

A review of ACM’s Junee Correctional Centre expressed concern over staffing levels and lack of inmate employment. Of the 21 prisons in New South Wales, Junee is the one from which the Ombudsman receives the most number of complaints, and had been censured for ‘unjust and unfair’ management (People’s Justice Alliance 1998; Miller & Costa 1998). Within the first 18 months of operation, two riots had to be quelled with the use of teargas and one prisoner had died in his cell (People’s Justice Alliance 1996). Within 13 months of ACM taking control of Arthur Gorrie Correction Centre in Brisbane, four inmates had committed suicide and another died in suspicious circumstances.

ACM’s management of the immigration detention centres is also under scrutiny. It is not possible to assess performance against targets because the Commonwealth has refused to release this information. The contract is the subject of litigation by an unsuccessful bidder and has therefore been deemed ‘commercial in confidence’. Despite this, the publicly available data gives cause for concern. There have been six riots at the centres in the last six months; in the year to November 2000 there were 121 incidents of actual or threatened self-harm, 68 hunger strikes and 43 incidents of actual or threatened assault against staff. In June 2000 there were mass escapes from three of ACM’s facilities, and a further five escapes a year later (Ombudsman 2001; Clennell 2000; Penal Lexicon 2000b; Age, 12 June 2001).

In December 2000 the operations manager at the Port Hedland detention centre twice assaulted a recently arrived detainee. The detainee was held by other guards during the first assault and ‘flexicuffed’ during the second. The manager was charged and pleaded guilty to two counts of assault. He was given a suspended sentence on the basis that his behaviour was out of character, being a product of his stressful work environment. His defence centred around his repeated but unsuccessful attempts to secure more staff and psychological support (Mares 2001). An internal ACM investigation found that the assault ‘was one of the causes of a riot the following day in which 180 asylum-seekers armed with shovels, rocks and metal pipes went on a rampage through the centre’ (Age, 27 April 2001). Six months later a similar incident is alleged to have sparked another riot at the same detention centre (Mares 2001). A report by the Commonwealth Ombudsman concluded that ‘women and children were at risk of possible harm in male-dominated centres’, that there were ‘systematic deficiencies’ in management, that there was significant variation in the quality of the facilities, that staff were in need of more training, particularly in the area of cultural sensitivity and conflict resolution, and that some of the facilities required a major overhaul, particularly at Woomera (Age, 2 March 2001; Ombudsman 2001).

The worst performing prison has been the Victorian Metropolitan Women’s Correctional Centre. After issuing three default notices, in 2000 the Bracks Labor government discharged AIMS from its contract. The prison has subsequently reverted to state ownership and control (OPSEU 2000a). Problems included: self-harm rates three times the next highest (this being another private prison, Port Phillip) (1998-99); 35% of inmates involved in prisoner-on-prisoner assaults compared with a state average of 9% (1998-99); and two uprisings triggered by overcrowding, that required the use of teargas and the intervention of the Police Special Services Operations Group (1999). There were also reports of failures to adequately identify and supervise ‘at risk’ prisoners (Ewing & Murphy 2000; OPSEU 2000a).

Payments for meeting performance standards were still paid, despite the private prisons’ less than impressive record (Auditor-General (Victoria) 1999; Audit Review of Government Contracts 2000, Case Studies:23). Fulham received 100% payment in 1997-98, and Fulham and Port Phillip got 100% in 1998-99. Deer Park never received less than 80%, and Port Phillip still managed to get 65% in 1997-98 even though ‘aspects of prison management were…breaking down’ (Harding 1998:4) and it was performing poorly in critical areas such as prisoner deaths, self-harm and drug abuse (Audit Review of Government Contracts 2000:25). The Audit Review (2000:32) commented:

Public Transport

Only the Victorian public transport system has been completely privatised, although all states use at least some private bus companies and New South Wales has also privatised parts of its rail system including the monorail, light rail, tram services and, up until recently, the Sydney airport rail link. This has resulted in a concentration of ownership of trains and trams in the hands of a few companies, of which the two most significant are CGEA Connex and the National Express Group. Also important are Transdev and Transfield P/L (Table 3).

Table 3

Private Operators of Public Transport

Sources: Company Annual Reports

The international evidence on the cost impact of public transport privatisation is not well developed, mainly because it has been concentrated in only a few countries (notably the UK, New Zealand and, to a lesser extent, the USA). In the UK, where the process is most advanced, the sale of the railways netted £5b. Since privatisation in 1996 the private sector has invested almost £11 billion into the system, compared to £8.4 billion from the state. Nevertheless, fares have risen to be the highest in Europe (Observer, 22 April 2001), while services have declined dramatically. Because of the parlous state of the system, the government will need to spend more than £30 billion over the next 10 years to make it fully safe and reliable. Particularly contentious has been the role of Railtrack, the monopoly owner of the track, whose performance has been widely criticised. In the midst of a crisis induced by poor track maintenance that caused two major collisions, Railtrack announced its intention to increase dividends to shareholders by 5%. Shortly afterwards, the CEO resigned, taking with him a payout of £1.4 million (Guardian, 15 November 2000, 22 June 2001).

Victoria's privatisation program was modelled on the UK experience. But whereas the UK sale initially generated positive cash flows in the short term, the sale of Victoria’s metropolitan train and tram system cost the state a net $120 million, excluding the costs incurred by the Public Transport Corporation and the train companies (Audit Review of Government Contracts 2000, Case Studies:142). Savings from privatisation of buses are estimated at around $25 million per annum, although most were from the initial round of sales. Savings were also made on replacement costs of up to $90 million, although the most recent budget has earmarked $180 million in capital funds to help the private operators upgrade their bus fleet (Victorian Government, Budget Paper no. 2, 2001-02). Operational subsidy savings on trams and trains are estimated to be $1.6 billion and a further $1.6 billion of savings are anticipated in capital funds in new rolling stock, but this is over a ten year period which has only just begun. As the Audit Review of Government Contracts (2000:150-1) pointed out, these savings are still only a promise:

In January 2001 fares were increased by 12% to 13% (Track Record, no. 5, April 2001).

The international evidence on the effectiveness of public transport privatisation is heavily influenced by the disastrous UK experience. Since privatisation in 1996 there have been four major train accidents caused by faulty tracks, two involving fatalities, one in 1999, the other in 2000, leaving a total of 35 people dead. The system was almost paralysed in the eight months to June 2001 by the imposition of 20 kph speed limits in recognition that passenger safety could no longer be assured. Timetables were abandoned in late 2000 and have only recently begun to return to normal (Guardian, 15 November 2000; Observer, 22 April 2001). The official inquiry into the Paddington crash which claimed 31 lives was scathing in its findings, attributing responsibility to ‘serious…persistent and lamentable’ management failures at Railtrack, poor training by the private train operators, and an under-resourced and light-handed train regulator (Cullen 2001). There is speculation that criminal charges will be laid against Railtrack as a consequence of their negligence, in what would be an unprecedented development (Guardian, 20 June 2001).

Table 4

On-time Performance and Cancellations for Trains and Trams, December Quarters 1999 and 2000 (Percentage of All Services)

Source: Track Record, no. 5, April 2001

The available data for Victoria shows that service levels declined in the first year that the private operators were running the system (Table 4), and the operators have been fined over $5 million for poor performance (Table 5). Since privatisation Victoria has experienced three train collisions, one injuring 13 passengers and another injuring three passengers (Age, 12 August 2000, 6 June 2001). While two of the completed official inquiries found driver error to be the main cause, the second also drew attention to the limitations of driver training and understaffing by the private operator (Safety and Technical Services Branch 2001:32).

The key issue of whether the privatised system is more punctual than its predecessor is impossible to verify, because the Kennett government relaxed the performance measure used to assess punctuality once the franchises were awarded: under the public system, punctuality was measured by the number of trains arriving at their destination no more than five minutes late; under the privatised system, this has been extended to being no more than five minutes and 59 seconds late (Auditor-General (Victoria) 1998; Track Record, no. 1, 2000).

Table 5

Incentive and Penalty Payments, Trams and Trains, Victoria, 1999 and 2000

Source: Track Record, no. 5, April 2001

Shortly after opening, the Sydney Airport rail link experienced financial difficulties arising from patronage levels far lower than had been estimated. In November 2000 the company went into receivership and it reverted to State Rail administration amidst claims and counter claims of responsibility. The costs to the state are at this stage unclear perhaps being as high as $200m. One commentator described the link as a ‘BOTCH’ rather than ‘BOOT’ scheme, concluding that it was doomed to fail at the outset:

In light of this, the state government subsequently rejected the proposed private extension of the Eastern Suburbs Railway from Bondi Junction to Bondi Beach, primarily due to doubts about traffic projections.

Analysis

There are three main conclusions that follow from the preceding discussion. First, the efficiency and cost saving claims advanced prior to contracting out taking place were exaggerated, without foundation or based on projections of future patronage levels that involved optimistic assumptions. In some cases no work was undertaken either before or after the contracts were signed that enable even a rough estimate to be made as to whether savings eventuated.

Second, the evidence shows a mixed outcome in the area of effectiveness. In prisons it seems to have deteriorated, so much so that the Victorian government has renationalised one prison, and the Commonwealth has agreed to put out to tender again the contract for running the immigration detention centres. Similarly, the New South Wales government has resumed control of the Airport rail link.

Third, rather than leading to increased accountability, contracting out appears to have lessened it in a number of ways. While most critics have drawn attention to the liberal use of ‘commercial in confidence’ clauses as a way of keeping information out of the public domain (for example, Public Accounts and Estimates Committee 2000), the focus here has been different. We have shown that, even without these clauses, in most areas of social and public policy it is difficult to develop appropriate and meaningful performance indicators, whether this be in health, education or community services more generally (Sheil 1997, 1998). Those being monitored can end up with an incentive to alter their behaviour to make sure that they do well according to the performance indicators, even though these don’t mean very much. As Group 4 commented in its submission to the Kirby Review:

Accountability problems extend further than this. We have seen that the contracting out of prisons and public transport has involved Australian governments entering into contracts with multinational corporations. These often establish subsidiaries with names that seem unrelated to the parent company, so it is difficult to make connections in cases of service failure.

Both Connex and National Express are foundation train franchisees in the crisis-ridden UK system, on which Victoria modelled its reform program. Sometimes, as with CCA, the company’s name is changed after a spate of bad publicity and the loss of some high profile contracts. In both prisons and public transport, companies have lost franchises in one state or country for poor service, yet simultaneously have picked up new business elsewhere. Shortly after winning the franchise to run half of Victoria’s train and tram system, Connex was the first private operator to lose a franchise in the UK (Guardian, 3 May 2001).

Similarly, in 2000 AIMS lost two of its prison contracts for poor performance over a relatively long period. In stripping AIMS of its contract to operate the Metropolitan Women’s Correctional Centre, the Corrections Minister commented that his decision had been prompted by a Corrections Commissioner’s report demonstrating that the operator was ‘failing fundamental security and drug prevention obligations’; the operator had been ‘given repeated opportunities to fix the problems and meet its contractual obligations, but failed to adequately respond to verbal and written warnings and three default notices’ (Haermeyer 2000). Yet only a year earlier it had been awarded the contract to finance, design, build, maintain and operate the Melbourne County Court complex (Penal Lexicon 2000a) and in 2001 opened its new Acacia Prison in Western Australia. Group 4 still managed to win Australian contracts during the late 1990s even though its performance in the UK had been less than exemplary: within a month of taking over the prison escort service, eight prisoners had escaped. In May 1993 another died by choking after guzzling illicit alcohol, and Judge Stephen Tumin criticised the Wolds prison (operated by Group 4) for offering a regime of ‘corrupting lethargy’ (Economist, 4 September 1993). And while Wackenhut was preparing to open up its six new immigration detention centres in Australia, it was losing its contract to operate the Travis County community Justice Centre in Austin, Texas, amidst claims of prolonged poor performance. Amongst other problems, 14 former staff were charged with sexual assault of female prisoners (Penal Lexicon 1999, 2000c).

Sometimes the problems with overseas operations have included clear cases of corruption. Executives at Vivendi Water were tried and found guilty of corruption in France during the mid-1990s, and Vivendi Construction was found to have participated in an illegal cartel in France between 1989 and 1996 involving ‘systematic, almost bureaucratised political corruption’ (Hall 1999). In 1999 the European Commission was engulfed in controversy over alleged corruption involving the awarding of a security contract to Group 4, which was said to have been given secret information on rival bids. The whole of the Commission subsequently resigned (Hall 1999). The spread of contracting out has also been associated with major corruption scandals in Australia, the most significant of which is that surrounding the ambulance and emergency call services in Victoria during the mid-1990s which led to damning findings by the state’s Auditor-General and the eventual establishment of a multi-million dollar Royal Commission (Auditor-General (Victoria) 1997).

In each of the cases dealt with in this paper, governments have awarded contracts to global companies, some of which dwarf them in size and economic strength. The consolidated operating revenues of the parent of the largest private prison company exceeds the annual tax revenues of any Australian state or territory, while the second and third largest had revenues that exceeded the tax revenues of any state or territory except New South Wales, Victoria and Queensland. In 2000, Group 4 Falck had a turnover of US$2.1 billion (A$4.2 billion), Wackenhut’s revenues were US$2.5 billion (A$5 billion), while Sodexho’s were US$9.9 billion (A$20 billion). Sodexho employs more people than the Commonwealth government. Group 4 Falck has operations in 50 countries, as does Wackenhut, while Sodexho has a presence in 70. A more extreme situation exists in the case of public transport. While the National Express Group’s turnover exceeds US$2 billion (A$4 billion), Transdev’s parent Groupe Caisse des dépôts is even larger and more complex., being closely aligned with the French government with respect to banking, finance and investment, and treasury. The group reported a consolidated balance sheet of US$177.6 billion for 1999 and a net income of US$1.9 billion.

Connex’s parent, Vivendi Universal, has interests in television, film and music (Canal+ and Universal Studios and the Universal Music Group), telecommunications (Vivendi Telecom International), and water and environmental management. Vivendi Environment subsidiaries include CGEA Connex, Vivendi Water and Aqua Alliance. Vivendi’s operating revenues for 2000 amounted to US$44.7 billion (A$90 billion), which is more than double the revenues of all Australian state, territory and local governments combined. Vivendi’s subsidiary Connex is not its only point of contact with Australian governments. Vivendi Water is involved in a partnership that has taken over the water treatment plants in Adelaide. The company is called United Water, and their partners are Kinhill and Thames Water, the latter being a creature of UK privatisations in the 1980s (United Water 1999). United Water was at the centre of the ‘big pong’ air pollution disaster that struck down Adelaide in 1998 (Sheil 2000).

National Express has formed important global alliances with other operators. National Express are joint owners of PLC, a company set up to provide smartcard issuance, management and processing services with compatibility across the UK and Europe. Other joint owners are: ERG Group, who created and operate the Metcard system in Melbourne; Stagecoach Holdings and FirstGroup, who are transport operators; and Sema Group UK, an IT and business services company. Stagecoach, FirstGroup and National Express are all committed to putting ERG’s smartcard readers in their buses throughout the UK. Their combined market share makes them the largest bus and train operators in the UK, with some two billion passenger journeys each year (ERG Group 2000). The inevitable interlinking of transport and security is made apparent in a joint bid for the ongoing franchise of Central trains in the UK by National Express and Group 4 Falck (Fildes 2001; Winkley 2001).

This increasingly complex web of global interconnections between these giant multinational players in the contracting out game extends to other operators in Australia. Serco Australia operates the information service for Transperth trains and buses, and similar services in Sydney and Brisbane. It also owns and operates the Great Southern Railway. In the UK Serco has interests in prisons, public transport, the Atomic Weapons Establishment and hospitals, and is a preferred tenderer for the proposed privatisation of air traffic control services (Transperth 2001; Serco 2001

). Serco and Wackenhut are partners in Premier Prison Services Ltd in the UK, where they operate six correctional facilities (Wackenhut 2001).

Contracting Out and Ideology

Why have our governments been such uncritical and enthusiastic supporters of contracting out? In part the answer rests with our liberal policy regime, which sees Australia line up alongside a limited range of other countries with low taxes, low public expenditures and a small and targeted welfare state that have been similarly predisposed towards privatisation: the USA, the UK and New Zealand (Esping-Andersen 1996, 1999).

Also significant has been the limited range of policy advice that our governments have sought, with the Industry Commission perhaps being the most influential (and the Audit Commission not far behind). In finding in favour of contracting out, the Industry Commission (1996) gave a less than even-handed summary of the available evidence. Describing the Australian research, it argued that while two studies found a decline in quality, ‘all other studies have found either no evidence of quality deterioration or an improvement’ (1996:107). This is true, but there were only three (1996:Table B2.1) studies that found quality improvements, while one found no change and the other study’s findings were ‘not statistically different from zero’ (1996:108). Similarly, while the Industry Commission concluded that the available evidence showed contracting out ‘can and generally does reduce the ongoing costs of service delivery’ (1996:140), this depended very heavily on the work of Simon Domberger and his colleagues from the Competitive Tendering Research Team at Sydney University’s Graduate School of Business. Of 17 studies cited, seven were authored or co-authored by Domberger, and a further eight were by his colleagues in a collection which he edited. Another was authored by the Australian Chamber of Commerce, leaving only one dissenting study from the left-of-centre Evatt Foundation, which found cost increases.

The crucial evidence is that furnished by Domberger himself, which found significant savings in a range of programs of at least 20%, and which has been widely cited over the years by those in favour of outsourcing. Domberger's work has been subjected to considerable criticism for its dependence on a suspect methodology which was weighted in favour of results showing a cost reduction (Hodge 1996; Paddon 1991). Hodge (1996) points out that Domberger compared the cost of public provision prior to privatisation with the contract price struck with the private contractor, whereas the correct benchmark should have been the public sector price under best practice conditions. Walker and Walker (2000:155-9) have raised stronger concerns:

Domberger’s work is favourable to contracting out because methodologically it lends itself to that conclusion. That the Industry Commission was not more discerning reflects its propensity to reach predetermined conclusions in favour of market based policy reforms, under cover of an even-handed ‘inquiry’ approach.

Conclusion

It is here at this interface between public policy and ideology that the real problems with contracting out are to be found. For rather than treat it as another policy tool, another means of achieving policy outcomes, Australian governments over the last decade have seen outsourcing as a policy end in itself, first in New South Wales, then Victoria, then Queensland and South Australia and more recently the Commonwealth. It was at this juncture that mistakes were made, transaction costs rose dramatically and service levels were compromised.

The argument that contracting out was necessary to make the public sector more efficient and customer focused is best seen in this context, for it is not supported by the evidence, particularly in the areas we have looked at. In prisons and public transport, costs did not fall in the way that they were meant to and service levels appear to have declined. We could have looked at other areas and reached very similar conclusions. The outsourcing of Commonwealth IT services (Auditor-General (Commonwealth) 2000; Humphrey Review 2000), automated ticketing (Audit Review of Government Contracts 2000), speed cameras (Audit Review of Government Contracts 2000), ‘build, own, operate and transfer’ infrastructure programs (Walker & Walker 2000) and emergency call centres (Auditor-General (Victoria) 1997) are examples where a strong argument along these lines could be, or already has been, developed. In addition, we now know that the cost savings that followed contracting out in many cases have simply been a product of cuts to workers’ pay and conditions rather than efficiency gains, a practice which has recently been ruled illegal by the Federal Court and has required contractors in Victoria to back pay employees (Age, 21 April 2001). The Productivity Commission’s claim that contracting out may have led to GDP gains in the order of $1.3 billion per annum (Rimmer 1998) is simply ludicrous, telling us more about the assumptions and values of the Productivity Commission’s modellers than about what has happened in reality.

Contracting out has not been a response to globalisation as some have suggested. But in the overly zealous way it has been promoted, it has been a major contributing cause. Liberal policy regimes have helped create a global market where governments enter into contracts with entities that in some cases are far larger than themselves. In the process, they seem to have lost the power to monitor performance and to put in place effective accountability regimes. The multinational players in the outsourcing game lose contracts in some places, only to pick up others elsewhere within this relatively small band of countries keen to do business with them. Increasingly they are entering into partnerships and alliances that enable them to secure new markets that continue to open up. Australian governments seem poorly placed to negotiate contracts with the fleet-footed global players that they have helped to create, at a cost to taxpayers and to the detriment of public policy more generally. It is time for a policy rethink.

References

David W. Lovell

UNSW at ADFA

Corruption as a transitional phenomenon: understanding endemic corruption

ABSTRACT

Over the past decade, the corruption of public officials has become a popular concern, the subject of considerable investigation, and the target of concerted legislative and international efforts. This is a period which largely coincides with the collapse of communism and the efforts to establish representative democracies and free markets in postcommunist states, but also includes the Asian economic crisis. In both cases, corruption of one sort or another—blat and crony capitalism—has played a major role in explaining the challenges and outcomes. This is not to say that corruption is confined to these countries, nor that corruption is a recent phenomenon. The temptation to corruption will occur wherever governments have monopolies and officials have discretion, which is another way of saying that corruption is ineradicable. But this paper argues that endemic corruption is a case of a different kind from incidental corruption. It explains endemic corruption as one of the responses by officials to the often conflicting demands of traditional tasks and loyalties, on the one hand, and legal-rational forms of rule on the other. It adds a historical and cultural dimension to Rose-Ackerman’s influential account of corruption as ‘economic’, but concludes by denying that culture can ultimately be used as an excuse for corruption.

1 Introduction

The issue of public sector corruption has, over the past decade, become prominent in national and international forums. It is increasingly discussed, legislated against, and subject to international agreements. The literature on corruption has expanded rapidly over the same period, as corruption graduated from an issue in comparative politics to a central problem of political and economic analysis. Corruption was correspondingly transformed from a problem of developing countries to a scourge that affects all political systems.

The Australian public sector is widely perceived as relatively uncorrupt, but the story of corruption in Australia goes back to the first European settlers, and there is no room for complacency (Grabosky and Larmour 2000). In a number of Australian states, and generally as a result of corruption scandals and inquiries, anti-corruption organisations have been legislated into existence. The Independent Commission Against Corruption (ICAC) created in 1988 in NSW (on the model of Hong Kong’s ICAC) is internationally respected, and similar bodies now exist in Queensland and Western Australia. Yet the decline of trust in government in Australia (Papadakis 1999, 76), like the decline in much of the Western world, is not on account of corrupt administrations, but opportunistic and greedy politicians.

In the region of Southeast Asia, however, corruption is rampant (Backman 1999). In July 2001, the Prime Minister of Papua New Guinea publicly described both his own party and his government as systematically corrupt (Forbes 2001). These corrupt elements, he suggested, were supporting demonstrations and other attempts to block the privatisation of state assets, and therefore reduce the opportunities for exploiting public resources. Malaysia’s deputy premier, Abdullah Ahmad Badawi, was reported as saying to a conference of the United Malays National Organisation (UMNO) in June this year that ‘The perception that UMNO is a corrupted institution must be changed. UMNO needs to take firm steps to restore its credibility and image so that some people no longer view it with contempt or disgust’ (Lyall 2001).

At the international, and multilateral, level there has been significant activity on the issue of corruption. In 1996, the United Nations General Assembly adopted the UN Declaration against Corruption and Bribery in International Commercial Transactions. In 1999, the Australian government signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, a convention that commits signatories to adopt common rules to punish companies and individuals who engage in bribery (OECD 2000). The Australian Parliament correspondingly amended the Criminal Code in 1999 to make the bribery of foreign public officials illegal (No. 43, 1999), and amended the Taxation Act (No. 58, 2000) to disallow tax deductions for bribes paid to such officials. The Australian government also sent a delegation in May 2001 to the Second Global Forum on Fighting Corruption and Safeguarding Integrity held at The Hague, a conference that involved most of the countries of the world. Since James Wolfensohn became President of the World Bank, that institution has targeted corruption, conducting a significant amount of research into the problem. Even the non-government organisation, Transparency International, has achieved a surprising amount of recognition, especially from governments. Its founder, Peter Eigen, was a prominent guest at the Second Global Forum. There are also substantial regional initiatives against corruption in Latin America, Africa, and the Asia Pacific, the latter sponsored in part by the Asian Development Bank (ADB). The next annual conference of the ADB-OECD Anti-Corruption Initiative for the Asia-Pacific will be held in November 2001 in Tokyo.

We should pause to note the level of hypocrisy in these international discussions. Abramovici (2000) argues that corruption is a major factor in international trade, and has become worse since decolonisation in the 1960s: ‘In simple terms the corrupted are public bodies in emerging countries, and the corrupters are companies based in rich countries’. The USA may have been one of the first to legislate against corruption, with its 1977 Foreign Corrupt Practices Act, but it still seems the preferred destination for ‘laundered’ funds. And countries that concede they have major problems with corruption criticise the West’s assumption of moral superiority. For corruption is an exchange that has two elements, a giver and a receiver, and the degree of ‘push’ and ‘pull’ in this relationship is not always clear. The West must take some blame for continuing corruption because many Western companies (sometimes backed even by their governments) corrupt foreign officials to gain an advantage over their competitors.

The focus on corruption is nevertheless to be welcomed. There is now little doubt that corruption is a major negative factor in any country, in terms of economic growth, government legitimacy, and general human security. It is a fundamental problem in developing countries and especially in postcommunist countries. And despite the increased recognition of the problems it creates, corruption is perhaps more extensive than it ever was (Tanzi 1998)—allowing for the intrinsic problems of measuring it (alleviated only in part by Transparency International’s ‘Corruption Perceptions Index’). Close attention to the developments in postcommunist states, for example, has revealed a rapid increase in corruption. Cohen (1995) has catalogued the activities of criminals in postcommunism, and argues that tens of thousands of businesses in Russia are controlled by organised crime. State officials are either powerless to act, or are willing accomplices. The situation in Romania (Alina Mungiu-Pippidi 1997) and Yugoslavia (Komlenovic 1997), among other countries, is similarly grim.

How is it that a problem which is the focus of increasing awareness and ever more explicit prohibition not only remains, but seems to have become worse? There are two sorts of answers to this question. The first is that if the problem of corruption is seen largely as the result of inadequate training, payment, professionalism and supervision of public officials—if it is seen as ‘incidental’—it can be limited but never eradicated. There are good reasons for this caution: the motivation of greed (let alone need) will always remain, opportunities to benefit from public office can never be entirely closed off, and corrupt transfers can generally be disguised. The first type of answer, therefore, is that corruption is part of the price governments pay for having extensive administrations and complex laws. The second type of answer is one of a different character. It suggests that corruption is endemic in some societies and will not be diminished by laws alone, but by a change of political culture. As Pasuk Phongpaichit (1996) declared in connection with Thailand: ‘In the long run, the checks and balances of a full democratic system and the development of a civil society will prove a more effective means to control corruption than the intervention of a man on a white horse’.

The problem with much of the recent discussion, and subsequent treaties and legislation, is that corruption is generally seen as a mechanical problem, requiring some procedural fixes. Thus corruption is conceived in such a way that answers of the first type, identified above, are considered sufficient. Evidence of growing corruption suggests merely that the fixes need to be more rigorously adopted and enforced. This paper argues that such a conception of the problem is inadequate, and the measures it proposes destined to failure. For it assumes that what we mean by ‘corruption’ is obvious and uncontentious. In many countries corruption is a much more complex problem connected with a transition from one political, cultural and organisational culture to another. The normative basis of ‘corruption’ in such countries is not clearly established, and public officials rely now on one and now on another understanding of their role. Corruption in these places is identified here as ‘endemic’. While procedural measures are not irrelevant in countering endemic corruption, there is a much more profound change that needs to take place to address its roots.

This paper examines endemic corruption through the experience of postcommunist states, and explains it as a consequence of a larger transition. Transforming corruption from an endemic to an incidental problem will require a major change in political and organisational culture that cannot be simply legislated into existence.

2 Corruption: endemic and incidental

The World Bank defines corruption as the abuse of public power for private benefit, and such a definition is widely accepted partly because it is relatively neutral as between different states. But the definitional issue is too important to be confined to a convenient phrase, and it is at the heart of the discussion in this paper. In particular, it makes assumptions about the underlying norms of behaviour in public office that may not always be warranted. I shall confine my remarks to corruption in the sphere of government, despite the recent extension of ‘corruption’ to cover the private sphere. (Of course, abuses occur in the private sphere, as people take advantage of their positions to defraud their companies or shareholders for personal benefit. But the laws to prohibit theft from employers and customers tend to be clear and clearly understood, and self-interest on the part of all the actors in this sphere leads to a heightened scrutiny of transactions and a readiness to complain about irregularities.)

The obvious objections to the standard definition of corruption reveal that cultural contexts play an important role in the behaviour of public officials, and should play a larger role in our understanding of them. In the first place, the abuse of public power can be not solely (or even) for private benefit, but is sometimes for the benefit of one’s class or party, or friends, or kin. Officials may depart from the rules out of a sense of loyalty, and without any personal gain involved. In some societies, gift-giving is an important part of social relationships, including the giving of gifts to officials. Bribes should be distinguished from gifts; Tanzi (1998) explains that ‘A bribe implies reciprocity while a gift should not’. Such complications lead Heywood to say that ‘it is possible to argue that the meaning of political corruption might vary with the nature of the political system in question’ (Heywood 1997, 6).

A legalistic definition identifies corruption as those acts performed by officials when departing from their legal obligations in exchange for personal advantages (LaPalombara 1994). But this will not do. It may be easy to operationalise, but it assumes the standards of rational-legal rule. Corruption on these terms is the use of public office in ways other than those sanctioned by rational-legal authority. And while Carl Friedrich agreed that corruption exists whenever ‘a responsible functionary or office holder, is by monetary or other rewards … induced to take actions which favor whoever provides the reward and thereby damage the group or organization to which the functionary belongs, more specifically the government’ (Friedrich 1972, 127–28), he nevertheless identified its core meaning as behaviour that deviates from a prevalent norm. The key issues, therefore, are not just determining whether a ‘deviation’ has occurred, but what is the norm.

The normative dimensions of corruption are most apparent when it is used in its generic sense as ‘deviation from a norm’. Passionate warnings about the corrupt society as diseased (Payne 1975) reveal the importance of norms, as do complaints about the corruption of many sporting codes because of the increasing importance of monetary incentives to their players. The International Cricket Council, for example, has established an inquiry into the corruption of cricketers after revelations about the extent of bribery in the game. This is particularly significant, for cricket was once a byword for decent behaviour and playing by the rules.

Some see corruption as due to the rise of the career politician, who joins politics for personal gain. Others, economists in particular, see corruption as a product of the rise of state intervention, with more opportunities for bureaucrats and politicians to circumvent the rules and act arbitrarily in their own cause. Certainly, both these explanations have some purchase: they provide motive and opportunity. Another view explains corruption as a product of the exaltation of the market mechanism, and a blurring of the lines between public and private, and the primacy of greed (seemingly reinforced by the ‘crony capitalism’ involved in the growth and then the collapse of the Asian economic miracle in the mid- to late- 1990s). Corruption may also be driven by the rise of big donors to political parties, and a decline in ordinary membership. Longevity in power (a factor in non-democracies, but also in democracies where governments have long periods in power) may also contribute to corruption, with its disdain for accountability of the actions of public officers.

The ‘structural temptation’ to incidental corruption can be explained in a relatively straightforward way, despite the diversity of causes already identified. Corruption of this type occurs when government has a monopoly supply of a good, where there is discretion on the part of officials, and where there is relative secrecy. As Robert Klitgaard (1988) put it, ‘Monopoly + Discretion – Accountability = Corruption’. All of these conditions are met in a great deal of government business. Where the defences of hierarchical and other types of external surveillance, and the defences of a professional ethic, morality and other types of internal surveillance, are together insufficient, corruption will occur. Corruption of this type is ineradicable, though it may be greater or smaller in different states and in different components of those states, depending on opportunities and traditions.

There would seem to be more opportunities for corruption the larger is the public sphere (ie, the more people it employs, or the wider the sphere of its interference and regulation of the private sphere, including the economy). But even if the opportunities exist, not all extensive states are extensively corrupt. Some of the least corrupt countries in the world—Canada, Denmark, Finland, the Netherlands and Sweden—have some of the largest public sectors, measured as shares of tax revenue or public spending in GDP. But many advanced states still have a significant problem with corruption, as the example of Italy shows. The United States, too, has its share of corruption (Dobel 1978; Rose-Ackerman 1999).

Corruption, therefore, is a problem everywhere. But it is a problem of a different order in some states. The line between incidental and endemic corruption may be difficult to draw, and it may not be a simple quantitative one, but it seems a useful distinction to make. It is connected in this paper with the norm of legal rational administration. Incidental corruption takes place against a background of established rational-legal authority; endemic corruption takes place where rational-legal authority is not yet predominant. There may be a substantial amount of incidental corruption, but it is of a different order to endemic corruption because the norms in the latter case are unclear. Although it is impossible to quantify it precisely, corruption is endemic in most postcommunist states. We know this through anecdote, through surveys of citizens, and through corruption perceptions indices. Corruption is such a problem because it retards the development of democracy and of the market, both of which are important for the quality of life of the citizens of postcommunism.

3 Corruption and legal-rationality

Most discussions of political corruption assume as their norm the legal-rational form of authority that was analysed by Max Weber. In this model the relationships between officials and citizens are formalised and regulated, with officials serving the state; the office rather than the incumbent is the most important element of the administrative system; and personal relationships with clients of the administration are subordinate to the formal, professional elements. This model presumes a certain sort of society, relatively extensive and anonymous, with a reliance upon formal, legal mechanisms. Such characteristics do not generally describe societies that have substantial traditional or kinship structures, often described as ‘developing’, nor all the societies that have emerged from communism.

Activities that are regarded as corrupt from an external perspective, whether because they offend Western norms, or even the legal code of the society in question, can nevertheless be functional. As Samuel Huntington (1968, 64) explained in his major study of changing societies, ‘Like machine politics or clientelistic politics in general, corruption provides immediate, specific, and concrete benefits to groups which might otherwise be thoroughly alienated from a society. Corruption might thus be functional to the maintenance of a political system in the way that reform is. Corruption itself may be a substitute for reform and both corruption and reform may be substitutes for revolution’. This is to see corruption as a pressure relief valve. It also fits with the Soviet experience, where a great deal of corrupt and illegal behaviour was undertaken with the tacit acceptance of the Communist Party: ‘From an economic standpoint, the level of corruption that obtained in the Soviet system was no less a logical product of that system than were the queues of citizens seeking scarce food items. Given the nature of the Soviet system … the creation of "the corrupt society" was absolutely inevitable’ (Clark 1993, 203). This point is reinforced by an earlier study (Berliner 1957) of management methods in USSR between 1938 and 1957. Managers used the illegal methods of blat and tolkachi simply to make the system work.

In connection with the Soviet system, Clark offers a key insight: ‘The law-based notion of official corruption, which may be defined as behavior of public officials aimed at the acquisition of forbidden or circumscribed benefits and made possible as a result of their official duties or position, can exist only in those societies that have a relatively well-developed notion of public office’ (Clark 1993, 8). Corruption, in the generally used sense, assumes that the role of public official is clearly understood by both official and citizen. But this cannot be taken as granted. The code of behaviour, and the expectations, in transitional states—those where legal-rational forms of authority are not predominant—are not always the same as for those who criticise corruption (Nye 1970, 566–67). They tend to be characterised by different, and competing, sets of norms. Traditional forms of authority exist side-by-side with modern forms; councils of tribal elders alongside parliaments, for example. Often these types of authority coexist in one person, who may be a senior kin figure and also a senior politician or bureaucrat. The transitional period is a period of tension between these different codes, or standards. As Huntington put it: ‘Corruption in a modernizing society is thus in part not so much the result of the deviance of behavior from accepted norms as it is the deviance of norms from the established pattern of behavior’ (Huntington 1968, 60).

Understood in this way, corruption is a problem not just for the reasons that it discourages investment and delegitimises governments (which can become ‘kleptocracies’ (Andreski 1968)) but because it traps them in a vicious cycle. The weakness of developing, or transitional states in trying to build legitimate institutions—what Gunnar Myrdal (1970) has called ‘soft states’, characterised by corruption, racketeering, bribery, arbitrariness, political expediency and indiscipline—is due to the relative lack of power in the system, and the lack of countervailing powers. It has been noted of many developing countries that ‘Coercion, force and authoritarian rule are all present in abundance, but power is a genuinely scarce commodity … There are few freely operating opposition political parties or independent judiciary systems. Most legislatures are or the rubber stamp variety. Interest groups are primitive and are mostly under the control of the government itself. Press freedom is rare … Laws are made or unmade and enforced or unenforced not according to some master guide, such as a constitution, but according to the whim of the administrator and the special access enjoyed by traditional elites’ (Bertsch, Clark and Wod 1991, 629–30).

4 Postcommunism as transitional

Postcommunist societies are also in transition to legal-rational forms of authority. It is not just a question of the operation of a (or even the same) bureaucracy in different contexts, Soviet and democratic, as might be assumed from the ready identification of Soviet state organisation as ‘bureaucratic’. It is a question of creating a new type of bureaucracy, a new type of state, and a new relationship between state and citizens. The new bureaucracy represents a new approach to the basic organisation, functions and expectations of bureaucracy. The presence, and the discussion, of corruption is symptomatic of a larger change in the character and consequent organisation of the postcommunist administrative system.

This is not the place to discuss the merits of the various models of Soviet socialism that were on offer, including the debates that raged over ‘totalitarian’, ‘vanguard party’ and ‘pluralist’ models (Fortescue 1986). However Soviet reality was described, a rigid distinction between politics and administration, of the sort liberal democrats are accustomed to making, did not exist. The Weberian notion of bureaucracy and rational administration did not fit comfortably the Soviet political-administrative system (Pakulski 1986). It might be better to think of the Soviet administrative system as ‘officialdom’ rather than bureaucracy. Indeed, the whole function of government and its administration was different from merely setting the framework within which individuals and groups could pursue their own interests. Rather, the state set the tasks of individuals and groups. This embodies not formal rationality, but a substantive rationality where what is rational is whatever is appropriate to achieving the overall state goal. Harry Rigby, in identifying this problem, chose to call communist systems ‘goal-rational systems’ (Rigby 1980, 19).

Success in the Soviet bureaucracy was not measured in terms of compliance with rules, but in terms of achieving outcomes; the structure and function of the Soviet administrative staff were heavily influenced by this (Rigby 1976). We were accustomed to thinking of Soviet reality as ‘bureaucratic’, since this was the label that Lenin used, and Trotsky and those whom he in some ways inspired—especially Bruno Rizzi and James Burnham—made popular. But this was not a professional bureaucracy of the type that Max Weber (1948, 196–204) described. The Soviet ‘bureaucracy’ was rather peculiar. Friedrich and Brzezinski (1965, 206) signalled this when they declared that the various political intrusions into administration by totalitarian systems meant that they ‘are less rational and legal and hence less fully developed from a bureaucratic standpoint than, for example, the governmental services of some absolute monarchies in the eighteenth century’.

Schwartz adds that there was an informal administrative code in the USSR, based on the tension between ‘party supremacy and system shoddiness—that demands and rewards risk taking for the good of the cause’ (Schwartz 1979, 431). Informal networks and their functioning within the large-scale Soviet bureaucracy became an organisational ethos. The Soviet system threw up challenges that relied on these networks to survive. They became a modus operandi. Many needed goods and services were acquired by ‘acquaintanceship and connections’; a related term for the informal system of exchange is blat (meaning ‘pull’, or ‘influence’). Hedrick Smith (1976, 88) described this as follows: ‘In an economy of chronic shortages and carefully parceled out privileges, blat is an essential lubricant of life. The more rank and power one has, the more blat one normally has. But almost everyone can bestow the benefits of blat on someone else … because each has access to things or services that are hard to get or that other people want or need’. The pressures on managers also led to the growth of people who could procure materials: tolkachi, or ‘pushers’. The plan was law, and thus the informal practices that most managers engaged in to fulfil the plan were illegal—but they tended to be regarded as ‘technical’ rather than ‘real’ crimes.

It is also worth remembering that the Soviet Union was a number of states and regions with quite different levels of development, and social systems. In some respects, it was a mix of modern and pre-modern social relationships. In some places, and at some times, the culture surrounding Soviet institutions influenced it into an even more intense pre-modernism. Simis, for example, describes the war of rival clans in the ruling elite of Uzbekistan in the 1970s, which used state offices as weapons and the control of such offices for enrichment (Simis 1982, 60–64).

When corruption began to be identified as a major problem in communist states, in the 1980s (Holmes 1993, 134–39; cf Clark 1993, 15), it seems likely that the behaviour of officials remained much the same as in the earlier Soviet period but that the standards had changed—there was a growing sense that officials should serve the public, and not themselves, the Communist Party, history, or some other rationalisation for the abstracted ‘proletariat’ which had earlier sufficed. It was a change in standard that may have been more readily taken up by ordinary people than by bureaucrats, as the evidence of perceptions of corruption in communist states suggests.

Why has postcommunism become such a breeding ground for corrupt behaviour? There was, as we have seen, a legacy of ‘corruption’ under communism (largely unacknowledged), due to a lack of professional administration, and the lack of a clear distinction between public and private spheres as officials used their offices for personal benefit, but believed—or pretended to believe—that they were acting in the public interest. Also playing a role was the unleashing of market forces, including a profiteering mentality, into societies where the restraints that attend developed markets are not functioning. There were few legal restraints, and perhaps little will, to restrain and channel greed. Likewise, there was little sense of professionalism among civil servants, with the limits that imposes. And there was little spiritual restraint. Despite the resurgence of the Russian Orthodox Church in Russia, and the Catholic Church in some of the East Central European states, there was little counterweight to consumerism. Pope John Paul II lectured postcommunist Poles on this very point, to their annoyance.

Another major reason why postcommunism has seen the rise of corruption is that in the era of privatisation there were enormous opportunities for taking advantage of the sale of public property. Mauro (1998) argues that larger government intervention promotes rent-seeking behaviour which leads to corruption. Thus, he states, ‘In the transition countries, the shift from command economies to free market economies has created massive opportunities for the appropriation of rents (that is, excessive profits) and has often been accompanied by a change from a well-organized system of corruption to a more chaotic and deleterious one’. Sokolov (1998)—an auditor of the Account Chamber of the Russian Federation—highlights the sort of corruption that happened in the course of privatization. And he underlines the lack of convictions for breaches of even the new laws, by insisting that there is still no independent judiciary.

The citizens of postcommunism believe that corruption in their states is increasing (Grodeland, Koshechkina, and Miller 1998). Some have identified a collapse of the old value systems, and the rise of explicitly self-aggrandising values (described as ‘the moral chaos and economic pressures of the transition’), that points to the hybrid nature of transitional societies, when things are out of kilter. Surveys show that there is not a great difference between the way people in former Soviet Union (FSU) and East Central Europe (ECE) judge their ability to influence political outcomes through elections (10% lower in the FSU); but there is a great difference in the expectation of citizens to fair treatment by officials. ‘Citizens in the FSU were 39 per cent less likely than those in ECE to expect fair treatment from officials without recourse to bribes or contacts’ (Miller, Koshechkina and Grodeland 1997, 183–84). And this finding did not simply reflect habits of complaint; there was indeed a substantial difference in treatment of citizens by public officials in the Ukraine as compared with the Czech republic.

Ledeneva (1998) argues that among the most important changes of the transition are, first, that the Soviet practice of blat shifted from everyday life of ordinary citizens to networks of former nomenklatura, now businessmen, and second, that in the lives of ordinary citizens ‘influence’ shifted to outright bribery (which is, in a sense, a less civilised form of relationship).

Organized crime and endemic corruption are major problems. They ‘threaten the stability of Ukraine and undermine its transition to a market economy’ (Shelley 1998). They deter foreign and domestic investment, and exacerbate the problems of capital flight. Citizens’ trust in government institutions is very low, but Shelley argues that Ukraine has failed to adopt the legal infrastructure necessary to combat crime and corruption. She adds: ‘The current diversification and flexibility of post-Soviet crime groups operating across all the successor states and the pervasiveness of corruption suggest that the phenomenon will not rapidly disappear when the initial transition period is over’. She argues that there are a number of sources of the problem, including the Soviet legacy and the methods of privatization, but that what deepens the problem is the ‘criminal-political nexus’, the connection between organised crime and political leaders. Some politicians have strong criminal connections, and become politicians in order to benefit from the immunity from prosecution it gives them.

Corruption happens at the top of postcommunist states. Here, among senior officials and politicians, it sets a bad example to more junior government officials, and sends very bad signals to foreign investors and aid donors. Corruption also occurs at the bottom. Here, among officials of various ranks, corruption is driven by a mix of need, greed, and a lack of professionalism. Corruption is encouraged by a system in which officials are not properly or promptly paid their salaries, in which they have significant discretion in their decision making, and in which there is little oversight of their decisions. The remedies here include paying officials properly and regularly (for many are not paid in this way on the assumption that they will take bribes to constitute or supplement their salaries), making transactions between officials and citizens more transparent to the public and to higher officials, making such transactions simpler and with less discretion available to the official, and ensuring that there is a paper trail of all transactions (and especially monies).

5 Explaining corruption

I have argued that endemic political corruption is best understood as phenomenon characteristic of the transition of public administrations to a rational-legal form of rule. I shall make a contrast in this section between this conception, and corruption conceived both as a timeless problem, and as another type of economic relationship.

It is customary to say that corruption is an ancient curse. There is no doubt that government officials have been abusing their position for private gain for thousands of years. More than 2000 years ago, in his classic treatise Artha-sastra, the Hindu statesman Kautilya declared that ‘[The King] shall protect trade routes from harassment by courtiers, state officials, thieves and frontier guards … [and] frontier officers shall make good what is lost … [It] is impossible for one dealing with government funds not to taste, at least a little bit, of the King’s wealth’. We can also find venal behaviour in officials frankly recorded in Samuel Pepys’ diary of the 1660s. And the examples could be multiplied endlessly. But corruption in the way that we commonly understand it is a relatively modern phenomenon; it denotes deviation from bureaucratic standards formulated by Weber; and its ‘victims’ are the public. It is modern because it assumes a public sphere that is devoted to the public interest, not simply to maintaining order and providing public works and infrastructure. What is described as ancient corruption is theft from the king or other rulers, the state being effectively their property. It is hardly surprising that officials in the Stuart court would be venal, given that many of them had purchased their offices. The distinction between public and private is therefore crucial to the contemporary usage of ‘corruption’.

Another important interpretation of corruption considers it to be simply another form of exchange, able in important senses to be analysed economically. Susan Rose-Ackerman has made a major contribution to the political-economic understanding of corruption, as a phenomenon which depends on a calculation of benefits and costs. The potential for corruption arises whenever a public official has discretion over a decision which incurs benefits or costs to others. At the interface between private and public sectors lie opportunities for private economic gains by public officials. Economic analysis is useful, she argues, because it ‘can isolate incentives for payoffs to government agents, evaluate their consequences, and suggest reform’ (Rose-Ackerman 1997, 31). Corruption varies widely in its extent and depth across countries, and even within countries; measuring it is difficult if not impossible. Rose-Ackerman examines corruption as a factor in developing countries, and even those which have growing economies, but argues that ultimately growth will be undermined as corruption spreads, and that the benefits of economic growth will be badly distributed (especially away from the ‘have nots’). Her interest is both conceptual and practical. ‘Bribes are paid for two reasons: to obtain government benefits and to avoid costs. An effective anti-corruption strategy should both reduce the benefits and costs under the control of public agents and limit their discretion to allocate gains and impose harms’ (Rose-Ackerman 1997, 34).

Rose-Ackerman treats corruption as akin to a market transaction, except one that it illegal. She notes that some countries maintain a stable corrupt system for some time, but this usually degenerates into kleptocracy. The wider the circle of officials in receipt of bribes, the more secrecy is likely to be maintained about it, and the less the threat of exposure. Yet stable corrupt societies risk an escalating cycle of bribes and payoffs, and thus degeneration.

But is corruption a way of understanding government decisions that is amenable to economic analysis? Rose-Ackerman’s political-economic approach combines the ‘economist’s concern with modeling self-interested behavior with a political scientist’s recognition that political and bureaucratic institutions provide incentive structures far different from those presupposed by the competitive market paradigm’ (Rose-Ackerman 1978, 3–4). The market analogy, however, must be heavily qualified. A market suggests voluntary exchanges and competition, and neither of these may be present in corruption. There may be exploitation or violence involved, and there is unlikely—because of secrecy—to be a bidding war between those who bribe. We may expect, in most circumstances, that individuals will try to benefit themselves; but how they do so, what limits they observe, and what priorities, is a complex and highly contextual matter.

Though corruption occurs everywhere, it is a fundamental problem in societies that are ‘transitional’ between traditional, pre-modern, or communist forms of order and the Weberian form of legal-rational order. People in positions of authority in such societies are caught between two value systems. There is no obvious recipe for eradicating endemic corruption in transitional societies; it is part of the general process of change, though it can doubtless be assisted by a cocktail of practical measures including reduced government enterprise, transparent decision making, organisational oversight, attempts to inculcate professionalism into public officers, the paying of appropriate salaries to public officers, and so on. But if endemic corruption is largely related to the transitional nature of some societies, then one of its consequences is to strand such societies in a state of limbo. Ultimately, the eradication of endemic corruption depends on the development of a strong civil society to demand better standards of political authorities. And civil society cannot be conjured into existence; it must be built.

A similar understanding of corruption to the one defended here has been used by Andras Sajo (1998) to explain corruption in East Central Europe as ‘structural’, in the sense ‘that it is part and parcel of the region’s emerging clientelistic social structures’. This clientelism, he argues, is related to the previous nomenklatura system of the communist states: ‘Moral crusaders and lawyers with do-gooder inclinations tend to approach corruption in a vacuum, oblivious of its social context’. They should understand that corruption ‘belongs to a family of social interactions—not all of them healthy, but not all dangerous or life-threatening, either—that, taken together, can be loosely classified as clientelism’. So, for Sajo, corruption is a sub-set of clientelism. It is not simply a series of unrelated, individual acts, but a social phenomenon. He sees ‘striking similarities between postcolonial and postcommunist societies’, especially in connection with nation building in the aftermath of an imperial legacy. Ultimately, its effects are negative: ‘even if it smoothes the operates of an underpaid bureaucracy, mostly it perpetuates the influence of political, party-centered, client-patron structures over the distribution of resources’.

6 Conclusions

Political corruption is a serious, and perhaps growing, problem throughout the world. The discussion in this paper is not intended to diminish the problem, or to undermine the many practical proposals that have been developed to deal with it. Indeed, practicality is the hallmark of recent approaches to fighting corruption. What this paper does suggest, however, is that corruption is a different type of problem in (for want of better terms) ‘developed’ and ‘transitional’ societies. The transitional societies identified here are the postcommunist states because, like the postcolonial states of the 1950s and 1960s, many of them exhibit significant patterns of informal and traditional behaviours that infiltrate and affect the relations between public officials and citizens. The corruption in these societies is endemic, and the solutions to it must be sought not just in procedural terms but in political and social leadership.

The procedural approach to reducing the problem of corruption is by now well-established. In general, it includes: reducing confusion about rules (administrative simplification and codification); reducing uncertainty about expectations of public officials (through training and developing a sense of professionalism); reducing need (by paying officials appropriately and regularly); increasing citizen expectations (by strengthening civil society, publicising the behaviour of public officers, and enforcing the law); and setting a good example (by political leadership).

In the spirit of this approach Peter Eigen, founder of Transparency International, has put forward an elementary 5-point anti-corruption program (Eigen 1996, 162): commitment by leaders; anti-corruption legislation, and enforcement; review of government procedures; salary review of the government sector; and review of legal procedures and remedies to make them an effective deterrent. Keith Henderson, a senior adviser with the United States Agency for International Development (USAID) proposed an 8-point action plan ‘aimed at (a) promoting more governmental accountability and transparent democratic processes; (b) increasing trade and investment and economic growth; (c) building capacity and public confidence in governmental institutions, and (d) developing public respect for rule of law societies’ (Henderson 1998). His plan was adopted by USAID in December 1997 for ECE and FSU states. And Robert Klitgaard has recently suggested some practical means for curing and preventing corruption in cities (Klitgaard, Maclean-Abaroa and Parris 2000). All of these proposals have their merits, but they are not sufficient for postcommunism.

Modern government does not presume, or require, virtue on the part of its functionaries. It provides a range of checks to corrupt behaviour such as nepotism, bribery and misappropriation of funds. These checks are not guaranteed and, given the secretive nature of corruption, a level of incidental corruption is inevitable. The larger problems associated with corruption, however, occur in political systems which are in transition to modern, legal-rational forms of authority. This endemic corruption is created by the tension between the different types of social relationship which are assumed by traditional and modern forms of ruling. Officials in transitional regimes should not be regarded as intrinsically evil, or culturally predisposed to corruption. Rather, they are responding—perhaps even in inconsistent ways—to the different demands and opportunities thrown up by the transition period. Among those opportunities are the bribes on offer from foreign companies wishing to do business in transitional countries.

Dealing with transitional situations and the endemic corruption that develops in them is an enormous challenge, and goes beyond the types of practical remedies suggested above (though it is likely to include them). It most important factor is leadership, the ability to set an example of public service and to convince other public officials, subordinates and citizens of the need to separate public and private considerations. Leadership also means denying perhaps the greatest temptation in transitional situations: an appeal to the standards of the established or traditional social relationships. It is well to rail against the paternal attitudes—and sometimes hypocrisy—of Western states and companies. But to build popular support on this basis is ultimately self-defeating, for reasons I have tried to explain. Corruption, and endemic corruption in particular, is a recipe for economic decline and governmental weakness.

References

Brendon O’Connor

University of Queensland.

Moralists not Monetarists: The American New Right and Welfare Reform

Abstract

This paper examines the origins and importance of the American New Right with a specific focus on welfare reform. It also argues that the New Right in America differs from the New Right in the UK and Australasia. The key difference in the American New Right’s agenda is the centrality of social issues rather than economic reform. Moreover, this agenda has been promoted in a very distinct manner that could arguably be called "populist." I conclude the paper by arguing that the New Right in America had a significant conservative impact on the moral tone of the welfare reforms of the 1990s.

Introduction

The enactment of a conservative welfare system in the mid-1990s in America can be linked to the actions of a combination of forces – intellectual, activist, and populist – which over time chiselled away at the credibility of America’s "liberal" welfare system (O’Connor, 1999, forthcoming1). In response to the success and influence of American liberals, particularly in the 1960s and 1970s, a countervailing force emerged in American politics at the activist level. This movement, which emerged in a variety of forms and forums, became known in the mid-1970s as the New Right. Intellectual critiques of the liberal welfare system often drew on arguments popularised by the New Right; likewise, New Right leaders drew on intellectual critiques that emerged out of think tanks such as the Heritage Foundation. Although the impact of the New Right on the welfare debate was not as specific and focused as that of anti-welfare intellectuals (Gilder, 1981; Murray, 1984), it was nonetheless very important because the New Right was most critical of those politicians who had supported the development of the liberal welfare system. Further, the New Right spent millions of dollars, and harnessed the energies of thousands of supporters, to discredit liberal politicians and liberal ideas. William Buckley Jr., often a target of New Right jibes, has described it as the "front-line troops of the conservative movement," calling them "brilliant technicians" who have exerted "the kind of lobbying pressure we haven’t seen in years" (Himmelstein, 1990: 93).

Comparative use of the term New Right

The New Right in America should be understood as something quite different to what is generally referred to as the New Right in Britain or Australasia. In Britain, Australia, and New Zealand the term New Right refers to a set of ideological views about the role of government in the economy. In these countries, New Right ideology and its advocates have promoted a greater role for the free-market and a correspondingly lesser role for the government in economic affairs. Deregulation, government cost cutting, and the privatisation of state activities have been the key elements of the New Right agenda outside of the US. Hence, Margaret Thatcher’s attack on the British welfare state is often referred to as a New Right attack. In America, the Right had long advocated a more laissez faire approach to economic policy, a minimalist role for the government, and a less regulated economy. The American Right as symbolised by Goldwater in 1964 had been less willing to accept the welfare state as an inevitable and necessary compromise between labour and capital – a position first legislated into practice by European conservatives wishing to avoid inter-class violence (Esping-Anderson, 1990). American conservatives were either less willing to make such compromises, or more willing to rely on law and order as a solution. In other cases, the hindrances of class on social and economic mobility were dismissed as European problems and not American concerns. Therefore, while the type of political opposition to the welfare state experienced in Europe and elsewhere in the Western world was new, hence the term New Right, in America anti-welfarism has been a consistent conservative position throughout the twentieth century. Although moderate Republicans such as Eisenhower and Nixon largely continued funding the welfare programs their liberal predecessors had developed, the level of this support was far below that offered by other Western welfare states. Moreover, Eisenhower’s and Nixon’s moderately conservative presidencies were consistently and harshly criticised by other conservatives who rejected the validity of an American welfare state. Where Thatcherism was seen as a departure from twentieth century Toryism – thus the relevance of the label New Right to describe her government’s policies – Reagan’s attack on the American welfare system was consistent with the conservative politics of Hubert Hoover, Robert Taft, and Barry Goldwater. These prominent twentieth century Republicans all rejected government welfare spending as a counter-productive policy. As a result of these differences, the New Right label developed a unique meaning in the American context.

The term New Right emerged in the United States to describe social conservative activist leaders and their supporters who had emerged as an important political force in American politics in the 1970s. In many regards, the New Right movement developed in response to the victories of liberalism in the 1960s and early 1970s. The New Right has consistently opposed liberal "social issues" including affirmative action, abortion, busing, and homosexual rights. On economic issues the New Right tends to be individualistic, pro-small business, and anti-government. The newness of this movement was its focus on "social issues" rather than on conservative business and mirco and marco-economic reform.

The Right in America had always been closely connected with business leaders from Wall Street to Main Street. Because of these links, economic issues had long dominated conservative political circles and the Republican Party’s policy orientation. In response to liberal social and cultural gains, some of which were accepted by the Republican Party leadership, a new force emerged on the American political landscape that operated on the fringes of the GOP, or sometimes entirely outside the party system. The nascent American New Right started promoting cultural, social, and moral questions as the most important "conservative" issues. This focus reflected the influence within the New Right of the growing fundamentalist religious movement. Fundamentalist preachers, who had entered the political fray in an organised political manner – and most significantly Jerry Falwell, founder of the Moral Majority – became a key element of the New Right leadership. Religious activists gave the American New Right a distinctive edge that was neither seen nor often understood in the rest of the industrialised world. At a time when the influence of religion and the intensity of religiosity waned in most western countries (Wills, 1990) America headed in the other direction and religion-based arguments became an increasingly regular part of political debate. In response to the successes of liberals and secular humanists at challenging and altering America’s social and sexual mores, religious activists emerged willing to publicly oppose these changes; because of the Religious Right’s rapidly growing supporter base and the publicity they received it soon became a powerful political force in American politics and community life.

The New Right played a crucial role in popularising conservative ideas and agendas. From direct mail campaigns to politicised churches to "talk" radio, its message was widely disseminated. Borrowing at times from the grassroots tactics of the New Left (Viguerie, 1980), activists involved in the New Right began letter-writing, mail list-collecting, and instigating various other means of political organising to increase awareness about the threat liberalism posed to America. This activism helped create not just a new conservative social movement, but a force increasingly referred to as a populist movement. Kevin Phillips and others soon characterised the New Right movement as "populist conservative" (Phillips, 1982: 195). Dolbeare and Medcalf in American Ideologies Today contend that:

The popular base of the New Right is made up primarily of two important and overlapping types of Americans. One is the fundamentalist religious groups, now numbering in the tens of millions, located chiefly in the South and Midwest. The other is the nationally distributed population group described as ‘Middle American Radicals’ (Dolbeare and Medcalf, 1988: 164-165).

Following Donald Warren’s research, these authors suggest that these "Middle American Radicals" make up about 25 percent of the population. "They are lower-middle class people who feel that they are being forced by government to bear an unfair share of the burden of social change, despite their hard work and loyalty to American ideals." Dolbeare and Medcalf’s description of the New Right base casts a rather wide net, which has its problems.

Commentators who see the New Right as a "pseudo-populist" movement have challenged its image as a populist movement. Michael Lind, a former senior editor of the New Yorker and employee of a Republican direct-mail company in the early 1990s, argues that: "The grass-roots right is really an ‘astroturf’ right – it consists mostly of a few careerists who have lived in Washington for decades and whose contact with the masses is mediated by computer technology" (Lind, 1996: 76). Lind, a one-time insider of the American Right, offers an important counter to the New Right’s populist image of itself when he contends that the New Right is substantially a top-down movement directed from Washington D.C. However, this critique under emphasises the widespread support these leaders are able to draw on, admittedly often through the use of scare tactics and politically alarmist campaigns. Describing this approach Lind is equally ungenerous of his former colleagues, claiming: "Since the 1970s, grass-roots conservative activists have mastered the technique of raising funds and mobilizing voters by means of highly inflammatory direct-mail missives targeted at susceptible voters whose names are listed in computer banks" (Lind, 1996: 76). Lind’s characterisation of "susceptible voters" is rather too passive, as these are the same people that regularly attend anti-gun reform rallies, sign anti-abortion petitions and protest outside abortion clinics, and who campaign for the most conservative candidates in state and local elections. The New Right has easily found a receptive and active audience across America from Washington D.C to Washington state. It is in truth both a top down movement and one with a large and active populist base to draw on.

New Political Issues with a Distinct Political Style

The emergence of the American New Right was also closely connected to the development of conservative single-issue groups including "Right to Life" campaigners, anti-gun reform members, foreign policy nationalists, anti-union movements, and "family values" organisations. These groups’ political efforts became inter-connected through the co-ordination and leadership of a highly organised coterie of emerging New Right leaders. The common use of the overarching label New Right owes a great deal to the success of such leaders as Richard Viguerie, Howard Phillips, Paul Weyrich, and Terry Dolan. They crafted out a broad set of common enemies – with liberalism as a principal target – to bring elements of the New Right coalition together to support New Right politicians or contribute to specific Political Action Committees (PACs). New Right PACs such as the National Conservative Political Action Committee (founded and chaired by Terry Dolan), the National Congressional Club (affiliated with arch conservative Jesse Helms) and the National Conservative Majority were among the highest spending PACs throughout the 1980s. The fundraising and coalition building successes of the New Right helped elect Ronald Reagan and a number of other conservative Republicans.

The American New Right was new in that it principally concerned itself with issues such as abortion, homosexual rights, and feminism. Its other distinctive feature was its style of conservatism. New lines of political conflict emerged as women, homosexuals, and other groups achieved considerable success when challenging the once all-dominant American social rules and mores in the late 1960 and 1970s. The adoption of various liberal policies such as new laws aimed at countering discrimination against people on the basis of race, gender, and sexuality resulted in a conservative political and social backlash, the political force at the centre of which came to be called the New Right. It opposed what it saw as the development of a new liberal status quo, thus, members called themselves "conservatives for change" (Hodgson, 1996). This claim was based on nostalgia for the old ways. By its own definition, the New Right movement was a radical one, not a traditional conservative movement. Paul Weyrich’s description suggests this:

However, as Jermone Himmelstein aptly points out, conservative movements since the 1950s had not been conservative in this sense; their goal has regularly been to undo the changes of the New Deal and its liberal legacy (Himmelstein, 1990: 92). It was possibly the style of New Right politics – its tactics and its posturing – that differentiated it most significantly from early conservative movements.

To many, the New Right symbolises the politics of resentment and frustration. At the movement’s inception New Right leaders were undoubtedly frustrated with the Republican Party, for failing to follow Goldwater’s lead beyond 1964 and for its unwillingness to effectively or enthusiastically promote New Right social issues. The New Right regularly argued that what it called the "Eastern establishment" and its liberal and moderate Republicanism was pulling the GOP away from important New Right causes. New Right leader Richard Viguerie dates the foundation of the New Right to President Ford’s selection of the liberal Republican Nelson Rockefeller as his vice-president (Gottfried and Fleming, 1988: 79). In The New Right: We’re Ready to Lead Viguerie writes of Ford’s choice:

Others date the beginnings of the New Right to the 1960s, when a number of emerging right-wing movements gained the attention of scholars who had previously argued that the end of ideology was upon them (Kolkey, 1983). Daniel Bell’s The Radical Right (1963), Richard Hofstadter’s The Paranoid Style of American Politics (1965), and Lipset and Raab’s The Politics of Unreason (1970) all explored the "radical right" or the "New Right." Each of these books explored groups, such as the John Birch Society and the Citizens’ Councils, that preceded the conservative social movements of the 1970s. The origins of the New Right can also be traced through conservative political groups such as Young Americans for Freedom, which produced a number of New Right leaders and activists. Furthermore, the origins of the New Right are also closely connected to the organisation and politics of the Goldwater movement which brought thousands of committed conservatives together in 1964 (Rusher, 1975; Diamond, 1995: 62-65). Richard Viguerie and others made great use of the lists of those associated with the Goldwater movement to help organise conservative fund raising activities in the late 1960s and 1970s. By the mid-1970s, due to the very effective co-ordination of Viguerie, Weyrich, and other leaders, the New Right had become more than a name linking single issue movements. Leaders started calling their movement the "New Right"; from that point on, journalists and other commentators followed suit. What had emerged was a powerful political force that Dolbeare and Medcalf call "the most significant new force in American politics in half a century" (Dolbeare and Medcalf, 1988: 164).

The Political Impact of the New Right

Although there was no specific anti-welfare organisation of any size or importance within the New Right coalition, the general outlook of the New Right was hostile towards the liberal welfare system. The single most influential anti-welfare component of the New Right has possibly been the Heritage Foundation, a New Right think tank which Paul Weyrich was instrumental in reinvigorating. The Foundation gained a reputation for being very critical of liberal welfare policy and proposed numerous "New Right" changes to the liberal system. Widely noted as one of the most influential think tanks in America during the Reagan Administration, the Heritage Foundation produced a series of policy blueprints entitled "Mandate for Leadership," which it urged the Reagan Administration to follow. These reports strongly promoted reduced welfare spending and argued for an end to liberal welfare policy. The Foundation’s journal Policy Review has been a forum for anti-welfare criticisms and the promotion of other New Right policy causes. The Heritage Foundation’s influence, however, possibly peaked between 1994 and 1996 when its advisers regularly caucused with Republican politicians. During the 1996 welfare reform debates the Heritage Foundation kept in close contact with Republican policy-makers. Republican Congressmen E. Clay Shaw Jr and Jim McCrery whom I interviewed about the policy process in 1997 openly acknowledged the advisory role of the Foundation and of its chief welfare spokesman Robert Rector.

Beyond the activities of the Heritage Foundation the strength of the New Right attack on welfare liberalism was two-fold. Firstly, all of the single-issue movements within the New Right coalition shared a strong dislike of liberalism, making anti-liberalism a rallying cry. Secondly, the New Right quickly developed an outlook very critical of bureaucracy, taxation, and so-called "big government" – all issues that put welfare liberalism on notice. American business groups and their political lobbying forces since the mid-1970s had also been taking up these causes along with their strong objection to so-called "liberal regulations." Thomas Ferguson and Joel Rogers in Turn Right (1986), and Thomas Edsall in Chain Reaction (1991) claim that American corporations and business organisations became more politically active and more conservatively orientated during the 1970s and 1980s. Moreover, they argue that the thrust of their political activities often complemented the anti-liberal and anti-welfare politics of conservative intellectuals and New Right movement. While these three forces had their differences, they shared a common set of enemies. Although the New Right was sympathetic to business concerns about the government spending too much money on welfare programs, New Right objections were frequently morally rather than financially driven.

The New Right attack on liberalism, bureaucracy, taxation, and "big government" would increasingly become part of the standard Republican Party rhetoric as the New Right’s influence expanded. By the 1990s, GOP House Representatives were regularly heard promoting an agenda that emphasised long-standing New Right concerns and policy themes. The 1994 Republican Contract with America spoke directly to New Right concerns about politics, politicians, and family values. The New Right’s resentments and worries had been widely heard since the 1970s; by the 1990s Republican politicians often closely connected with or supported by New Right groups increasingly responded to these concerns. Whereas in the 1970s the New Right was often operating outside the GOP, by the 1990s New Right leaders and ideas were an integral part of the Republican Party. Moreover, the Christian Coalition and other New Right forces at present have a particularly strong influence on open Republican primaries, where only 10 to 15 percent of the voting public tend to choose the party nominees. Thus, New Right support is crucial for Republicans in many districts across America. The success of House leaders such as former Speaker Newt Gingrich represents the rise of the New Right from the fringes of American politics to the centre in the 1990s.

The political strength and influence of the New Right movement were first realised nationally in 1978 when it spent heavily to help defeat a number of liberal congresspersons. The New Right targeted liberals who had supported the Panama Canal treaty which it vehemently opposed. Ronald Reagan encouraged his New Right supporters by campaigning against the signing of the treaty, with an eye to the 1980 presidential elections. The passion these debates aroused led Kevin Phillips to argue that nationalism had become a key binding issue for the New Right coalition in the late 1970s and the early 1980s (Dionne, 1992: 231). In 1978, responding to the signing of the Panama Canal Treaty and other grievances, the New Right targeted liberal congressional incumbents by publicly criticising them on television and in other forums, with the use of its now very well-functioning campaign financing apparatus. Godfrey Hodgson calculates that: "By 1979 the New Right held some forty seats in the House of Representatives and ten seats in the United States Senate, besides countless seats in state legislatures and places on city councils and school boards and other local offices" (Hodgson, 1996: 183). The new congresspersons who entered the House of Representatives in 1979 included Newt Gingrich of Georgia, who had received New Right funding and campaign support (Viguerie, 1980: 75, 131). Gingrich’s career typified the New Right outlook towards the "liberal welfare state."

After a period of initial uncertainty, campaigning against the Roe v. Wade decision became a crucial element of New Right politics. Paul Weyrich explains that at first the fundamentalist response to Roe v. Wade was that it "proves we should have nothing to do with politics and keep to ourselves." They reasoned that those who raise daughters properly do not need abortions (Hodgson, 1996: 178). However, within a few years religious leaders committed to seeing Roe v Wade overturned made abortion rights a matter of national importance. The very strong moral position the New Right took on the abortion debate illustrates its increased willingness to argue publicly for certain standards of sexual morality. This moralism had a significant impact on the welfare debate particularly with regard to New Right criticisms of "illegitimacy."

In the 1980 elections the New Right targeted liberals who supported abortion rights with considerable success. Six senior liberal Senators who were "pro-choice" received particular attention. With the benefit of New Right money, very well-funded negative campaigns were waged against Senators George McGovern of South Dakota, Birch Bayh of Indiana, John Culver of Iowa, Thomas Eagleton of Missouri, Alan Cranston of California, and Frank Church of Idaho. Only Eagleton and Cranston were re-elected. The defeat of Senators McGovern, Church, Culver, and Bayh was a major blow to American liberalism, further compounded by the symbolic victory of conservatism over liberalism in the presidential election of 1980. Although the facts regarding the 1980 election were more complicated and contradictory, the journalistic spin that the 1980 election was a rout for conservatism over liberalism and a watershed election, which reversed the 1932 watershed result achieved by FDR soon passed into political folklore. Symbolically the 1980 election was viewed as signifying an ideological shift in American politics; as a result, liberalism was placed on the defensive, and liberal programs were soon in jeopardy.

The New Right initially operated outside of the GOP, aiming in its early years to be a mass movement rivalling and surpassing the American Labor movement in size and influence. The New Right organisation differed from many other conservative movements in the way that it aggressively reached out to the working and middle classes (Dionne, 1992: 232); it was an unashamedly populist movement. Jermone Himmelstein sums up this difference: "Conservatives had also failed, the New Right activists reasoned, to reach out to the hard-hat, ethnic, and white Southern constituencies that had supported Wallace and might be ripe for conversion to the Republican Party and conservatism and the movement needed new ways for doing so" (Himmelstein, 1990: 81). Because of its hostility towards elements of the Republican Party, at its inception the New Right declared itself bipartisan. Although it made a concerted effort to appeal to the social conservatism of Democrats (particularly targeting Catholics and so-called "ethnics") and independent voters (Himmelstein, 1990: 83), the reality was that the New Right links with the Republican Party have been much closer. Furthermore, its appeal to social conservative voters was electorally beneficial to the Republicans and highly detrimental to the Democrat’s liberal coalition: the New Right helped bring social conservatives – including many Southerners – across to the Republican Party.

What do these machinations have to do with welfare reform? Firstly, the New Right clearly put liberalism under attack; once fringe campaigns built up a ground-swell of anti-liberal sentiments that eventually led to liberalism being widely portrayed as un-Godly and un-American. The resulting political environment portrayed moderate Democrats like Mondale and Dukakis as liberal extremists. As I have argued elsewhere (O’Connor, 1999), American welfare programs need the support of a credible liberal ideology to survive. Secondly, the New Right also directly criticised the costs and effects of welfare spending. These attacks gave voice to a certain popular resentment against welfare.

Opposition to Big Government and Big Business

New Right criticism of welfare grew out of its broader concern with the problems that they claimed were inherent to government bureaucracy and government spending. The burden that "Big Government" places on the "average taxpayer" has also been a constant New Right refrain. Such sweeping laments became a standard element of New Right politics. Alan Crawford’s groundbreaking and widely cited analysis of the New Right, Thunder on the Right, describes the New Right’s attitude to the welfare state as "the rage against Leviathan." Crawford, whose concerns are those of a more traditional conservative, argues that the New Right’s resentment towards the welfare state "is the result, at least in part, of the incapacity of its adherents to come to terms with the modern society – with the corporate state, with large business institutions, and with the organized labor movement" (Crawford, 1980: 208). Given the unavoidable need for bureaucracy in any modern society the New Right’s demonisation of bureaucracy is at best naïve and at worst politically irresponsible. The New Right’s indiscriminate attacks on the federal government and its bureaucracy may have fuelled the rage of frustrated extremists who see the federal government as their mortal enemy.

The New Right has continued to mistrust large organisations. Their criticisms of institutions as generally anti-democratic often resembled the New Left critique. The labels "New" Right and "New" Left both refer to more "democratic" movements, reliant on greater participation from "grassroots" supporters and activists. Although the claim has been a strong element of the rhetoric of both movements, whether either is in fact more democratic than its predecessors is debatable. At times the New Right has extended its critique to include negative comments about "big business" and "corporate welfare;" questioning the activities and morals of corporate America. This criticism of big business, to a certain extent, has often been more posturing and censoring than fundamental disagreement. Throughout the 1980s the New Right and big business put aside some of their differences to defeat liberal candidates and support Reagan and, to a lesser extent, George Bush Sr. At times Republicans with strong New Right backgrounds targeted so-called "corporate welfare" as part of their attack on all government spending. Others, more concerned with moral issues, have questioned the values of corporate America – particularly of those in Hollywood and elsewhere in the entertainment industry. Patrick Buchanan’s 1996 presidential campaign drew heavily on anti-corporate New Right rhetoric to reach out to voters affected by downsizing and factory closures. Such rhetoric went down well in New Hampshire, but worried business leaders and in turn the Republican Party hierarchy who kept Buchanan’s name off the ballot in the 1996 New York state primary.

After the 1994 GOP congressional victory, corporate America expressed its fears, through the business press, that the Republican majority was not exactly the kind of pro-business majority they had wanted. Soon after the 1994 election Fortune magazine’s cover story graphically illustrated this concern: "TODAY’S GOP: The party’s over for BIG BUSINESS." The cover story goes on to claim that: "In a political arena now dominated by small business populists, anti-government conservatives, and the religious right, corporate America’s the odd man out – mistrusted, resented, impotent" (Kirkland, 1995: 36). The pages of Business Week echoed this message of corporate unease and concern (Business Week, January 16, 1995: 26). These conflicts date back to the battle between "Wall Street" and "Main Street" that has often been played out in the GOP. The New Right draws its support from "Main Street" small business owners who believe that they foot the bill for "corporate welfare." This concern about corporations as beneficiaries of the welfare state spreads right across the New Right. Its fiercely anti-establishment politics fuelled this belief, which had previously led to attacks on wealthy Republican politicians such as Nelson Rockefeller. Corporate directors are similarly criticised for belonging to the East Coast elite that acts against the interests of "the people."

New Right concerns about corporate welfare infiltrated congressional discussions in the 1990s. The powerful New Right inspired Congressmen Richard Armey has described farm subsidies and government export-market programs as "welfare for the rich." Furthermore, elements of the New Right have attacked corporate America for promoting culturally permissive values. Fortune’s post-1994 election special also highlighted the so-called "culture war"; the concern for business was that a moralist and censoring Congress would hurt entertainment industry profits and bring bad publicity to firms with progressive attitudes to homosexual rights and other social issues. The so-called "cultural war" has had a significant impact on welfare politics throughout the 1980s and 1990s. Conservatives have become more strident in their assertions about what cultural behaviour they believe is unacceptable (i.e. too "permissive") and have argued that welfare should be cut off if people do not "play by the rules." The list of undeserving recipients has come to include teen-age mothers, solo-parents who continue to have more children, and non-working solo-parents. This harsh judgement of "lifestyles" overrides very practical concerns like what happens to the children if welfare support is cut. Newt Gingrich famously argued the best way to break this cultural cycle was to move from Aid to Families with Dependent Children (AFDC) programs to orphanages. Although Gingrich’s orphanages plan was politically dismissed, AFDC no longer exists, and as I argue in a forthcoming article (O’Connor, forthcoming1), the Republicans made their case for the abolition of this 61-year-old entitlement program on predominantly conservative moralistic grounds.

Crawford, in his discussion of the New Right’s criticism of institutions, elites, and "bigness," is largely unsympathetic to the New Right outlook. He argues that the rampant individualism of the New Right reflects their political näivety and impetuousness, and shows up the inability of its members to cope with the organisation of an advanced mass society. This line of criticism tends to paint the New Right, particularly the Religious Right, as more backward and simpler than other Americans, an outlook that remains a popular retort amongst conservatives and liberals. The Washington Post echoed these sentiments in 1993 when it asserted that members of the Religious Right are "largely poor, uneducated, and easy to command." Such sentiments are not too far removed from H.L. Mencken’s claims in reference to the Scopes "monkey trial" that evangelicals and fundamentalists were "rustic ignoramuses," "anthropoid rabble," and "gaping primitives of the upland valleys." However, claims that the Religious Right is more ignorant and backward seem questionable today, given that "7% of evangelicals now perch in the $75,000-a-year-and-up income bracket, and 6% hold advanced degrees, vs. 10% and 8%, respectively, in the general population. That’s according to the most comprehensive recent survey of white evangelical Protestants" (Kirkland, 1995: 43, 45). Other socio-economic surveys have also concluded that religious fundamentalists differ little from the rest of the population, except obviously that they are more socially conservative (Himmelstein, 1990: 98).

The Religious Right

To understand the New Right one must examine the role of the Religious Right within the large umbrella movement. Undoubtedly the strongest arm of the New Right movement at the present the Religious Right has a prominent voice within conservative politics on social issues. Its rise as a mass political force was first noted in the late 1970s and the 1980s, when the voting participation of Christian fundamentalists dramatically increased, as did their loyalty to – and eventual influence on – the Republican Party (Diamond, 1995). Furthermore, the number of Christian fundamentalists was increasing, so they were becoming both more active and more numerous. Many American Christian fundamentalists cast their first ballot in the late 1970s or the early 1980s. Like Southern blacks, they were an untapped electoral voting block that started to vote in a fairly consistent and reliable manner. Reflecting on the impact of the Religious Right since the 1960s, one is faced with two initial and crucial questions. Firstly, why did America’s white churches, preachers, and fundamentalist Christians become increasingly political during the 1970s? Secondly, why was religious politics generally so conservative?

The answer to the first question lies both in the actions of certain nationally prominent leaders and in widespread concerns about certain social issues amongst American fundamentalist Christians. Commentators who see the Religious Right as a top-down movement (Crawford, 1980; Lind, 1996: 76-78) focus on the extremism in the preaching and politicking of conservative religious leaders such as Jerry Falwell and Pat Robertson. They argue that such preachers have created a powerful religious force in American politics through their respective organisations: the Moral Majority, founded in 1979, and the Christian Coalition, founded in 1988 at about the time the Moral Majority was disbanded. The alternative view sees the Religious Right as a grass-roots social movement that began to find a voice in various coalitions in the late 1970s and to be heard within the Republican Party in the 1980s and 1990s. My view is that, as with the American Right in general, the Religious Right was politically directed and effectively organised by energetic ideologically driven leaders, but that these leaders quickly found a receptive audience for moral fundamentalism and for their political claims across America.

The political and "grassroots" nature of the Religious Right can be traced back to changes within American church affiliations that occurred between the 1960s to the 1980s, when many of the large mainline churches lost large numbers to more fundamentalist denominations. These new denominations were particularly successful in an area spreading south from Virginia, throughout the old Confederacy across Texas to Southern California. Fundamentalist churches often attracted businesspeople willing to invest in building new churches and religious networks, and who wanted to see their churches enter the political fray (Hodgson, 1996: 165-166). By the late 1970s, they were calling for political donations, registering voters, and encouraging political activism by their members. Some viewed this as populist, religious grassroots democracy in action; others saw it as the older practice of religious zealotry and indoctrination. E. J. Dionne suggests that the movement away from mainline Protestant churches reflected the appeal of getting back to the uncompromising basics of religion which the fundamentalist churches offered (Dionne, 1992: 221-222). In other words, they offered certainty in a time of uncertainty, and something to believe in and promote in a constantly changing world.

The explosion of radio-evangelism and tele-evangelism (the so-called "electronic church") undoubtedly helped to spread the conservative message from the late 1970s onwards. It is estimated that by the late 1970s there were "36 wholly owned religious channels, 1,300 religious radio stations, and dozens of gospel television shows that buy time on commercial stations" (Crawford, 1980: 161). In 1980 Jerry Falwell’s television show was attracting fifty million viewers (Diamond, 1995: 163). Collectively, preachers such as Falwell, Pat Robertson, James Robinson, and Jim Bakker were reaching an estimated 100 million Americans each week (Carroll, 1982: 537). From their electronic pulpits these preachers increasingly attacked liberalism for introducing drug abuse, homosexuality, feminism, abortions and secular humanism to American society. The Religious Right have portrayed themselves as classic outsiders campaigning against an "ungodly minority" of "secular humanists" who run the government, education, and the media (Himmelstein, 1990: 97). This broader attack has included more specific criticisms of liberal welfare policies. For example, Pat Robertson in one of his widely distributed books, The New Millennium (1990), praises Charles Murray’s ideas, arguing that:

Education was the first issue of public policy about which the Religious Right (and the New Right) became politically vocal; abortion rights were taken up only later (Hodgson, 1996: 177-178). As argued earlier, soon after fundamentalist churches began responding publicly to Roe v. Wade rather than opt out of "politics," they started making broader political pronouncements about the permissive nature of liberal sexual morality and the need to oppose the spread of liberal values. They condemned out-of-wedlock births and abortion as both personally sinful and damaging to the social fabric. Marriage and abstinence were soon promoted not only in the church, but also in public forums on welfare and other social policies. Moreover, once they became politically active, conservative Christians seemed willing to support other conservative causes and in turn conservative politicians. Although the full story of the political sociology and psychology of the emergence of the Religious Right is beyond the scope of this paper, a few basic points nevertheless need to be made.

In the early 1980s Christian fundamentalists become increasingly involved in conservative political organisations like the Moral Majority in reaction to the victories of American liberalism (Dionne, 1992: 224) and the social changes associated with the "1960s." Many commentators, liberal and conservative, argued that the Christian fundamentalists wanted a return to the past. The neoconservative Nathan Glazer suggested that the fundamentalists had launched a "‘defensive offensive,’ meant to get us back to, at worst, the 1950s" (Neuhaus and Cromartie 1987: 250-251). Glazer’s assessment of the rise of the Religious Right emphasises the importance of the liberal court decisions of 1970s in arousing the political motivation and energies of American fundamentalist Christians.

Undoubtedly, abortion became a crucial political issue for both fundamentalist Christians and for American Catholics, thus creating an alliance. In his autobiography Jerry Falwell writes how he began to change his mind about preachers being involved in politics after the Roe v. Wade decision (Dionne, 1992: 224). A decade earlier, Falwell had criticised Martin Luther King’s political activities arguing that: "We are not told to wage war against bootleggers, liquor stores, gamblers, murderers, prostitutes, racketeers, prejudiced persons, or institutions or against any existing evil as such … Preachers are not to be politicians, but soul-winners" (Hodgson, 1996: 180). By the end of the twentieth century few topics have escaped Falwell’s critical public comment, including his views on the supposed corrupting homosexual influence of certain children’s toys.

Others within the Religious Right have suggested that the abortion decision was not as important initially as saving their children’s education. In the late 1970s Christian fundamentalists starting publicly attacking secular humanism and its influence on public and Christian schools (Hodgson, 1996: 178). Susan Faludi claims in Backlash (1992) that anti-feminism drove the cause of the Religious and New Right more than any other issue in the 1980s, an important reminder that the Religious Right was rebelling against the political and social changes which altered the environment in ways that many people found unsettling and challenging. For some this resulted in a period of transition or dialogue. For those more attached to fundamentalist religious orders, however, the impetus was often to become politically active in fighting against liberalism and secular humanism so they could actively resist these changes. This call for resistance to change is very similar to the Reaganite arguments of George Gilder in Wealth and Poverty.

At the electoral level the Religious Right first focused on registering fundamentalists who had never previously voted. In 1980 the Moral Majority focused its efforts on registering two million new voters in time for the upcoming election. Partly because of Reagan’s conservatism and partly because of the effective self promotion of the Moral Majority, much of the mainstream press exaggerated the influence of fundamentalist voters on the 1980 election and Reagan’s policy outlook (Dionne, 1992: 233-235; Hodgson, 1996: 184). Reagan and some of his advisers spoke a language that encouraged the Religious Right, but Falwell’s organisation and, later, Robertson’s Christian Coalition were more often than not disappointed with the record of both the Reagan and Bush Administrations. Some turned to local politics – a strategy encouraged by Christian Coalition leader Ralph Reed – while others focused on seeking more influence on the Republican Party and its agenda.

The New Right and the Religious Right have long realised that their influence is greatest when the voting turn out of the wider public – who are generally less conservative as a whole – is at its lowest. In the 1994 mid-term congressional elections where only 45 percent of the population voted and fundamentalist Christians made up 22 percent of the voting public, their influence was widely recognised as crucial to the GOP securing victory. The Religious Right, however, has not yet been successful at producing a leader within the GOP. In 1988, tele-evangelist Pat Robertson campaigned in the Republican primaries with little success, although this did occur around the time when a number of scandals afflicted prominent preachers, in particular Jim Bakker and Jimmy Swaggart. During the late 1980s some commentators were ready to say that the charge of the Religious Right had come and gone. Recent events suggest this was a miscalculation. After Jerry Falwell disbanded the Moral Majority in 1988, Pat Robinson re-emerged in 1989 to launch the Christian Coalition, which by 1994 had 1.8 million members and an annual budget of $20 million. During the 1994 election the Christian Coalition distributed 60 million voter guides and congressional scorecards through 65,000 churches. In the 1990s political analysts have regularly described the Religious Right as the most powerful Republican voting block in America. Fairly strong evidence seems to support this contention, given the relatively high levels of voting among this group and the fact that 78 percent of white born-again Christians voted Republican in 1994 (Kirkland, 1995).

Conclusion: Welfare is reformed

The Religious Right’s impact on American politics has been particularly visible in the increasingly strident moralism of debates about social policy and scandals over the private conduct of politicians. Morality and "family values" have become not just part of conservative political speeches, but also of the chapter and verse of legislation. This influence has been profound in the area of welfare reform. During the Reagan era, welfare debate started incorporating the language of a conservative moral crusade that had not typified discussions about welfare since the New Deal. In the 1980s the moral values and sexual activities of welfare recipients received increased negative attention in policy debates – as my discussion of the work and influence of Gilder and Murray illustrates (O’Connor, forthcoming2). The welfare debate became increasingly cast as a debate about how to stop so-called "illegitimate" births. The influence of the Religious Right became evident as conservatives regularly relied on censuring and stigmatising language when talking about welfare recipients and the effects of providing welfare. The Religious Right played an important role in creating this climate of moral "policing" and moral criticism upon which the GOP based many of its claims about welfare during the 1996 welfare reform debates. Religious leaders had led the way in using harsh critical words to describe the "self-inflicted" plight of the poor and "irresponsibility" of those raising children outside of wedlock.

Politically the impact of this conservative religious climate was symbolically felt first during the Reagan years when "family values" became a standard element of conservative political rhetoric. American politics became imbued with a conservative moralism distinguishing its political discourse from that of most other western democracies. This had such potent impact on the welfare reform debates that moral questions began to override financial issues. The Republican Party increasingly promoted welfare positions that emphasised traditional morality and conservative cultural values. They staked out this ground as the best legislative path in the 1994 Contract with America. The case for welfare reform in the Contract centres on "reducing illegitimacy." The Contract promised such strong corrective medicine as denying benefits to teenage mothers and placing time limits on benefits to non-teenage mothers. Drawing on the alarmist language of the New Right the Contract argues these changes are needed to "reverse the skyrocketing out-of-wedlock births that are ripping apart our nation’s social fabric" (Contract, 1994: 65). This moral agenda found its way into welfare law in 1996. The first paragraph of the first page (the "Findings" section) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) states:

The important point to make here is that conservative traditional religious values had found a strong voice in the Republican Party in the 1990s and the PRWORA reflects this religious conservatism. The less judgmental approach towards personal morality, sexual behaviour, and parents’ relationships embodied in the liberal welfare system was largely dismissed as inappropriate with the enactment of the PRWORA. Republicans involved in drafting the PRWORA admitted when I interviewed them that legislating moral standards was not quite possible, but they argued that they saw their legislation as a reaction to decades of sending permissive moral messages to potential welfare recipients. The GOP promoted this outlook during the welfare reform debate; welfare committee member Representative Jennifer Dunn argued that: "It’s time to use the theory of tough love. We’ve got to stop [subsidising illegitimacy]. Now is the time" (Bryner, 1998: 111). Similarly, during my interview with Representative Talent’s legislative assistants they presented the PRWORA as a moral Act primarily concerned with reducing "illegitimacy." The strong moralism that underpins the PRWORA illustrates the significant influence of the New Right on the GOP and its approach to welfare reform.

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