Editorial: not just for Christmas - getting the government we deserve

In his last appearance on the 7:30 report before the election, John Howard warned Australians against flirting with change for change's sake:
'It's not like a Christmas present you didn't want and you can take it back at the Boxing Day sale, it's not like that.'
And with that, a popular political maxim bit the dust – it is possible to lose an election by underestimating the intelligence of the voting public. At the time this rather patronising comment seemed to symbolise a Prime Minister who was becoming out of touch with voters as they turned away from him. But Mr Howard is not alone in his low opinion of how seriously Australians take their politics.

Cynics like to say we get the governments we deserve, and to an extent this is true. When we stop paying attention to politics, we make it a lot easier for politicians to stop paying attention to us. If we vote for the political equivalent of the crazy warehouse guy ('All the services you want at half the price!! Why pay more?'), we shouldn't be surprised when we get policies built to fall apart as soon as we rip open the wrapping paper.

Yet it is also true that governments get the citizens they deserve. Treat elections as a marketing campaign and expect people to shop around for the best deal they can get for themselves. Speak only to swinging voters in marginal seats and expect the rest of the population to stop listening. Portray yourself as a Strong Leader who will relieve voters of the burden of making hard decisions, and expect them to be unforgiving when the decisions you've made (or avoided) on their behalf go awry.

In the first edition of InSight for 2008, Ian McAuley looks at the nature of political leadership and argues that the last thing Australia needs right now is another Strong Leader. Responding to Judith Brett's recent Quarterly Essay Exit Right, which he describes as 'a demolition of the stereotype of the clear-eyed and determined visionary who leads from the front, who sees what must be done and does it', McAuley argues that Kevin Rudd will need to learn from Howard's mistakes. Chief among these was a tendency to deal with difficult issues either by denying their importance (as with climate change) or by making sudden, top-down decisions, often in the face of broad public opposition (as with Iraq and WorkChoices).

The new government will not have the luxury of avoiding difficult issues, but it must also avoid the temptation to play Santa and drop policy solutions on the populace like packages down a chimney:

'A process which engages with the community, which explains the difficult tradeoffs facing the people, and which acknowledges the possibility of pain, is more likely to result in enduring change. It may be slower than quick, decisive action, but it is more effective in the long term.'
Howard was right – governments aren't just for Christmas. It will take much more than a three year term to solve the complex problems Australia faces – but the actions we take now will have consequences far into the future. It's often said that decisions are made by those who turn up. If it can exercise true leadership by speaking honestly about hard issues and inviting us to look for common ground, the Rudd government will find that a much broader group of people start turning up, and the decisions it makes will be better as a result.

Also in this edition

Exit polls taken after last year's election showed that economic growth alone is no longer enough to guarantee votes. In Progress and wellbeing: more than GDP and tax cuts, John Langmore and John Wiseman argue for the new Labor government to adopt broader measures of progress than its predecessor.

In What's Super about Labor's new GP clinics? Jennifer Doggett, author of the CPD paper A New Approach to Primary Care for Australia, revisits the arguments for investing in primary care and looks at what will be involved in implementing Labor's election policy on 'GP Super Clinics'.

Regulation can be beneficial, but only if it is responsive and flexible, writes Nicholas Gruen in Regulating for innovation. He argues that Australian governments need to adopt a post-Taylorist approach, harnessing the ideas of the regulated and relieving firms that can demonstrate their own excellence from the more onerous requirements.

CSR expert Susan Mac Cormac looks at alternatives to regulation from a different perspective - how can we make life easier for companies that combine profit-making with a social mission? How can we make boards responsible to a wider group of stakeholders? Mac Cormac reviews the options in The emergence of new corporate forms.

And on climate change, John Perkins has an idea on how Australia can outpace the Kyoto process without having to go it alone in Global warming and the case for a coal tax, and Kellie Tranter explains why Australian governments at all levels are in danger of being sued if they don't act fast in Climate change litigation: the heat is on.

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Enter left: let’s hope Rudd isn’t a 'Strong Leader'

My impression of Australia's political transition is conveyed in a photograph published in the Canberra Times a few days after the Governor-General swore in the Rudd Government. It shows two couples - Kevin, Therese, John and Janette - taking tea at The Lodge in Canberra. It could have been a promotional shot for a real-estate firm, showing how, after the heat of the auction, the transaction has been advantageous for both buyer and seller.
It has been a tranquil transition. No gloating, no hubris, no revenge. The strongest sign of emotion was Maxine McKew's irrepressible smile, but she, too, showed extraordinary grace in victory.

The Rudd Government will not sink the boot into John Howard. Even if it were of a vindictive nature, there would be no point, for he has departed from the political landscape.

It would be unfortunate, however, if Rudd and his colleagues, either in their good grace or political pragmatism, do not reflect on the failings of the Howard Government, for in those failings there are warnings and lessons for any government.

Judith Brett's Quarterly Essay 'Exit Right - The Unravelling of John Howard', should be compulsory reading for all politicians and their advisers. Doubtless it will appeal to those Howard haters who wish to indulge in the fleeting joy of schadenfreude, but it is a far more profound work, for it takes to task the popular but false notion of the virtues of the Strong Leader. (Brett capitalises the term 'Strong Leader' almost as an archetype.)

Brett shows how those qualities of doggedness, determination and discipline, which were so much part of Howard's character and which are so typical of the Strong Leader, were the very qualities that contributed to his downfall. My reading of her essay is that it is not so much a criticism of John Howard, as a general criticism of the Strong Leader, with Howard as a convenient and topical case study. It's a demolition of the stereotype of the clear-eyed and determined visionary who leads from the front, who sees what must be done and does it.

In her analysis, she draws on the work of Graham Little, who, in turn, draws on the work of the psychoanalyst Wilfred Bion, a renowned authority on group dynamics and one of the founders of Britain's Tavistock Institute.
A supporting perspective can be found in the work of another psychoanalyst, Ron Heifetz, founder of the Center for Public Leadership at Harvard University's John F Kennedy School of Government.

Unlike the popular writers, Heifetz rarely refers to 'leaders' in his teaching and writing. Rather, he talks about the work of leadership. In his terms, leadership involves mobilising people to do 'adaptive work'.

Typically, in the psychoanalyst's office, the task is about helping the client to adapt to some difficult situation such as a marriage breakup or death of a spouse. The traditional psychoanalyst steers the relationship through a difficult path, in particular avoiding dependency and being on guard for the mechanisms the client uses to avoid doing his or her own difficult adaptive work.

Heifetz takes this approach to the political sphere, where he develops a normative theory of leadership similar to that of the work of the professional psychoanalyst.

Judith Brett's examples provide illustrative case studies of where there are departures from professionalism, particularly where the 'Strong Leader' avoids the adaptive work and allows - or encourages - dependence amongst those around them.

One of the most common means of avoiding adaptive work is to engage in denial, and nowhere is this better illustrated than in the case of the Howard Government's approach to global warming. We can see it too in his approach to the economy, where his message was reminiscent of then British Prime Minister Harold Macmillan's claim 'you've never had it so good', hoping that while we went out shopping we would ignore our economy's structural deficits.

Howard, in his own words, wanted Australians to be 'relaxed and comfortable', not to think about difficult issues like climate change, foreign debt, household debt and other indicators of structural weaknesses in the Australian economy. The Strong Leader is like the paternalistic father putting his children to bed, assuring them that there are no hobgoblins or wicked witches out there.

Another way to avoid work is to create a distraction, such as a threat from which the Strong Leader can protect his flock. Howard's 'war on terror' and his strong claims on border protection ('We decide who comes into this country') were cases in point. There are indeed hobgoblins and wicked witches out there, but the Strong Leader will protect us. It helps, of course, if we can have someone real to fear. Osama Bin Laden is a little too far away, but there are plenty of people in our suburbs who share his faith and who may be carrying an AK47 or suicide belt under those strange clothes. And the big bad union thug about to beat up a hapless small businessperson is always a convenient hobgoblin, as demonstrated in the Liberal party's scaremongering advertisements during the recent Federal election.

Yet another way to avoid work is to engage in ad hominem attacks. To John Howard, most issues involved clear-cut choices. To Howard and his ministers, critics - particularly academic and professional 'elites' - were his enemies. Even Machiavelli, writing 500 years ago, could have warned him of the risk of such a confusion.

Howard's failings are in the past, but they are relevant to our newly-elected government. The strong lesson from Judith Brett's essay, and from Ron Heifetz's teachings, is that leadership is difficult. It is particularly difficult from a position of authority, for Heifetz carefully distinguishes authority from leadership. Authority is vested in a position, such as the position of Prime Minister. Leadership, by contrast, can be exercised from any position.
Leadership, by its very nature, is unsettling: authority, on the other hand, is about maintaining the system in equilibrium. There is a necessary tension, and many people in positions of high authority do not handle that tension well.

From the position of authority there are certain assets. The position of Prime Minister comes with a strong voice, and a certain capacity to decide what issues are on the agenda. Howard managed that agenda carefully: the Republic was off the agenda, as was Aboriginal reconciliation (until the pressure became overwhelming); by contrast issues where the government had a strong lead in the opinion polls were kept on the agenda.

But there are also certain liabilities attached to the authority position, particularly the position of Prime Minister. One, of course, is the strong pressure of electoral politics. Another is the network of lobbyists, ministerial staff and public servants. In the inner circle is a Praetorian Guard of advisers protecting the Prime Minister and the Executive from the outside world and its bad news. And there is the strong influence of the public service, whose competence lies in its handling of continuity. The public service is adept at resisting fundamental change, not because of any inherent conservatism, but because fundamental change is painful. Its response to an incoming government's reform agenda is often to recast difficult adaptive issues into simple technical problems requiring no more than an incremental change in direction.

Heifetz stresses the difference between technical and adaptive issues. Public bureaucracies are good at handling technical issues - building new roads, enacting consumer protection laws, and collecting taxes. This is not to say such issues are free of controversy: every new physical project seems to involve some NIMBY issue. But adaptive change is more difficult, for it often involves significant loss, and not the sort of loss that can be covered with a tax break or financial compensation. Those losses can involve a change in lifestyle (e.g. adapting to a low carbon economy), or the loss of a way of life (as is confronting many farmers and foresters).

Hence, there is a temptation for governments to ignore such difficult issues, at least until after the next election.

But when a problem becomes overwhelming, there is also the temptation to take immediate and decisive action - a particularly appealing path to the Strong Leader. As Brett says of Australian electors (not unlike the electors in other democracies) 'what they want are solutions'. It is telling that she recounts Costello's mocking of Kevin Rudd, when he says of Rudd's faith in committees 'A leader doesn't go to committees; a leader knows what he wants and announces it'.

That power is always available, and, at times, may have to be drawn on. But it is dangerous. For example, it has taken the world's great democracies into a costly war in Iraq. More basically, it fails to engage with the community. In the short term, while all goes well, it leads to a culture of dependence, but when people come to feel the pain associated with decisions which they do not 'own' they react strongly. Heifetz uses the term 'assassination' to dramatise the reaction. When a government says 'trust us' on interest rates or housing affordability, it is setting itself up for political assassination.

By contrast, a process which engages with the community, which explains the difficult tradeoffs facing the people, and which acknowledges the possibility of pain, is more likely to result in enduring change. It may be slower than quick, decisive action, but it is more effective in the long term. When he was Industry Minister, John Button showed it could be done: over several years he was able to bring industrialists and unionists to accept the need for reductions in tariff protection. His process was slow, but it was inclusive, and it was in contrast to the earlier initiative of the Whitlam Government's decisive 25 percent tariff cut, which had the effect of delaying further tariff reform by a decade.

If, through community engagement on important issues, a government establishes trust, it will accumulate goodwill to be drawn on when it must make a quick decision or take actions which are difficult to explain. But trust is a fragile asset. The Wheat Board scandal and the 'children overboard' issues cost the Howard government dearly; even when it was acting in the public interest its initiatives were confronted by hostility and resistance.

To conclude, then, what are the difficult adaptive issues facing the Rudd Government? Doubtless more will arise, but four prime candidates are coping with climate change, modernising our economic structure, meeting the needs of indigenous Australians and reforming health care.

• The adaptive challenge of climate change is huge. Signing the Kyoto Convention was important symbolically, but the real adaptive work is ahead of us. It will undoubtedly mean changes in our everyday lifestyles in terms of energy costs and water use. For some it will mean huge disruption. For example, there is no assured future for much of our agricultural activity, such as irrigation-based farming and grazing in the arid zone (a long-standing source of Australian mythology). The easy way to weasel out is to complain about the Arabs and the oil companies for gasoline prices, and to offer financial drought assistance to farmers, but that's avoiding the hard work.
• Our economic structure is weak, but it's difficult for any government to admit it, particularly when most people really 'have never had it so good'. Our high living standard (or, I should say, our high level of material consumption), is based on the relatively easy cash flows of natural resources and increasing household debt. One day we will have depleted our easily-won resources, and one day we will find we have gone beyond the limit of our credit cards. Whatever long-term solutions are available, there will be some short-term pain as we make the necessary economic adjustments.
• Aboriginal reconciliation is about much more than saying 'sorry', although, as with climate change, symbolic action is important. The problems faced by Indigenous Australians, particularly those living in remote communities, are huge, and we are only starting to realise that we have an impoverished and disconnected group whose conditions are on a par with some of the worst regions of the African continent. There is no easy solution, and whatever approach is taken will upset some people's deeply held beliefs about the desirability or otherwise of paternalism and self-determination.
• The fourth difficult adaptive issue is health care. For more than half a century we have muddled through with incremental solutions to basic problems. We have pretended to have a universal and mainly free system, but the reality is that we cannot have it all. There always has been and always will be some form of rationing, by the intervention of governments and health insurers or by market forces, but our present mechanisms of rationing are haphazard, costly and unjust. It is a hard call on a health minister to engage with the community, to put hard questions such as 'how much should we pay from our own pockets without the distortion of insurance?', 'how should we ration high-cost care for people with self-destructive lifestyles' and 'what principles should guide us in switching from curative to palliative care for the frail aged?'. Bureaucrats and cautious politicians will want to go on with incremental solutions, which will duck these hard issues and will make our arrangements even more costly and unjust.

So, when Kevin Rudd and his colleagues read Judith Brett's essay, will they find in it lessons for themselves? Will Rudd be tempted to follow John Howard not only into the Prime Ministerial Suite but also into his style as the Strong Leader? Or will he and his fellow Members of Parliament engage the community on hard issues and exercise strong leadership?

References

Ron Heifetz and Marty Linsky, 'Leadership on the Line - Staying Alive through the Dangers of Leading' (Harvard Business School Press MA 2002)

Ron Heifetz, 'Leadership Without Easy Answers' (Harvard University Press MA 1996)

Charles E Lindblom, 'The Science of "Muddling Through"' Public Administration Review Spring 1959

Niccolò Machiavelli, 'The Prince' (originally published 1531, several translations)

Progress and wellbeing: more than GDP and tax cuts

Why does economic growth alone no longer seem to be enough to guarantee electoral support? The election results and a poll by the Swinburne Institute for Social Research taken after the election show that there was a reaction amongst many voters against the preoccupation with the economy during the last couple of decades.

Economic growth is not what determines economic security for most people. Pollsters report that many people feel that obsession with the economy has marginalised attention to their concerns about health, education and the environment.

There is growing recognition that economic activity is a means to the end of human wellbeing rather than an end in itself, and that the economy should be the servant of society rather than society the servant of the economy.

This view is supported by the dominant trend in public comment on the tax cut proposals made by both the Liberal and Labor Parties during last year's election campaign, which indicated stronger support for action to reduce greenhouse gas emissions and improve health services and education than for another round of tax cuts.

The factors which influence the wellbeing of each of us differ, but research in many countries has led to the conclusion that total wellbeing has social, economic, environmental, psychological, physical and spiritual dimensions.

Objective influences on wellbeing include life expectancy, health, income, nutrition, employment, education and democratic participation. Other influential factors include relationships with family and friends, work-life balance, personal safety and freedom and a sense of purpose and progress towards achieving individual and community goals.

Importantly there is increasing evidence that individual wellbeing and happiness is strongly affected by a sense that our paid and unpaid work contributes to the common good as well as to our own wellbeing. In other words our happiness depends on the wellbeing of others as well as on our individual situations.

Fortunately the Australian Bureau of Statistics has recognised for some years that wellbeing depends on far more than income and wealth. Dennis Trewin, the previous Australian Chief Statistician, wrote that, ‘around the world a consensus is growing that countries and governments need to develop a more comprehensive view of progress, rather than focusing mainly on economic indicators such as Gross Domestic Product'.

The Bureau's annual report on Measures of Australia's Progress includes indicators relating to the lives of individuals, the environment and living together as well as the economy.

The individual and social indicators include health, education, training and work and those for society on social cohesion, crime and public participation in governance. Environmental indicators include threatened species, air and atmospheric quality and overfishing.

Regrettably, the Howard Government had little interest in these broader measures of progress, but they are being kept up to date and are available to the Labor Government if it chooses to use them.

The European Union and many other member states of the UN are also adopting broader measures of progress. The EU is now attempting to integrate economic, social and environmental strategy. Rather than measuring progress simply in terms of growth of national income, four strategic pillars have been adopted: employment, social inclusion and sustainable development as well as economic growth.

The EU has set fourteen indicators which are more revealing than those conventionally used against which to judge progress. For example, growth is measured by purchasing power per person; employment by the participation rate of people aged 15 to 64; social inclusion by the poverty rate and differences in employment rates between regions; and environmental sustainability by greenhouse gas emissions.

Governments cannot, of course, solve all the concerns which affect the wellbeing of individuals and communities. Some dimensions of happiness and wellbeing are factors which government can do only a little to influence, like the quality of relationships between family and friends. Others such as economic security, health, housing affordability, environmental sustainability, cultural vitality and democratic participation are strongly influenced by public policy.

In Australia the McCaughey Centre at the University of Melbourne has developed a range of indicators of local community wellbeing to support local community planning and policy making. These could be used as one starting point for a national debate about broader indicators of wellbeing and progress.

This in turn could form the basis for a wide ranging public conversation about the kind of society, economy and environment we want to build and pass on to future generations.

One of many examples of policy change which could result from this approach would be to give top priority to investing in early childhood education and reducing child poverty. Australia's early childhood programs are inadequate, covering only 36 per cent of three and four year olds in 2002, compared with the average of OECD countries of 68 per cent. Despite the research showing that early childhood is the most effective stage at which to influence educational outcomes, Australia is spending only 0.1 per cent of national income on pre-schooling compared with the OECD average of 0.4 per cent.

Greater investment in early childhood programs is also needed if the best quality services are to be available to all children and child poverty in Australia is to be reduced. Targets of cutting child poverty to 8 per cent or less by 2010 and to 3 per cent in 2020 would be achievable with appropriate policies.

The election results and surveys of opinion taken around that time suggest that increasing numbers of people would welcome greater engagement in such discussions. It is encouraging that Prime Minister Rudd, Deputy Prime Minister Gillard and Treasurer Swan have each called for such public discussion.

The emergence of new corporate forms

Most debates about corporate responsibility narrowly define a stark choice between government regulation and free markets. A US-based organisation called Corporation 20/20 advocates a third path: system redesign. While the corporate responsibility and governance movements have achieved some notable progress, they argue that a more systemic, integrated transformation is both needed and plausible at this moment in history. The following article is an edited extract of a paper given at the 'Summit on the future of the Corporation', hosted by Corporation 20/20 in Boston, November 2007.

Many believe that the prevailing corporate form focuses on maximizing profit for stockholders at the expense of other stakeholders - specifically employees, the community in which it operates, and the natural environment. Even corporations that strive to integrate corporate social responsibility (CSR) into their operations face constraints on their ability to pursue deep social responsibility, primarily as a result of the fiduciary obligations of their boards of directors.

The inadequacy of the rigid line between for-profit corporations and tax-exempt organizations has been highlighted by two different movements which have gained momentum in the last decade. For-profits are beginning to pursue social missions like nonprofits, and nonprofits are taking on profitable subsidiaries much like for-profits.

The emergence of these two movements raises questions about the adequacy of existing corporate forms. Are there significant limitations to for-profit and nonprofit models that prevent organizations from successfully blending profit making with social mission?

There are many proposals being floated and experiments underway today. As yet, it is unclear whether any of the proposals can create large-scale change quickly.

On the nonprofit side, the various types of hybrids do work. However, social enterprises are hobbled by many legal constraints, including a seemingly arbitrary designation of what is considered tax-exempt revenue, and the labyrinth of legal rules that regulate their activities. In addition, nonprofits are required to articulate a fairly narrow public purpose in their articles. They also lack access to financial markets, relying instead on philanthropy.

Incorporating more for-profit business principles into certain types of revenue-generating nonprofit models will serve the nonprofit community well. Yet nonprofits on the whole remain a very small percentage of the overall economy and will never have the power to effect widespread change.

On the for-profit side, the problems inherent in new voluntary or mandatory charters could frustrate their effectiveness. Proposed new forms - incorporating profit-making with social mission - may work for small-scale for-profits. Yet the 'legacy problem' represents one of the great challenges of retaining that social mission over time. Many socially oriented for-profits find that their social mission is dependent on founders' fervor, and when founders retire or sell, their social legacy is often lost as more traditional owners and managers take over.

Federal or state governments could offer a possible solution by passing a law to create a new corporate form which would embed social purpose into the DNA of future corporations. This new form could be structured as either a for-profit charity, a socially conscious corporation, or some combination of both. Such hybrid models have both strengths and weaknesses.

One example of of this approach is the model proposed by the Minnesota State Legislature in 2006 through the Minnesota Responsible Business Corporation Act. Under the act, a corporation would have the ability to designate itself as a Socially Responsible Corporation, using the letters 'SRC' after its corporate name rather than the standard letters 'Inc.' The aim of the legislation is to create a design that integrates a dual focus on both financial success and social responsibility.

The legislation includes the following features:

(a) In determining the best interests of the corporation, directors and officers must consider (in no particular order of importance), the interests of the corporation’s stockholders, employees, customers and creditors; the 'public interest'; and the long-term as well as short-term interests of the corporation and its stakeholders.
(b) Employees will elect 20 percent of the board of directors, and an additional 20 percent of seats will be reserved for public interest directors (who are also required to balance the interests of all stakeholders).
(c) If publicly traded, corporations will be required to issue an annual 'Public Interest Report' along with their annual report.
(d) The board is required to provide opportunities for stakeholders to provide advisory input at regular stakeholder meetings and through a web site or email listserve.
(e) The corporation is required to train its officers, directors, and employees regarding the special duties to stakeholders.
(f) To prevent courts from overriding the legislation, the law explicitly carves out the application of the common law of agency, under which the officers and directors are required to act almost solely in the interests of the stockholders by maximizing the corporation’s profits.

Despite its benefits, companies that chose the new form may face a lack of flexibility, possible conflicts with future business plans, and more limited access to capital markets. Also, an external regulation (even one that is voluntary) may require greater ongoing enforcement costs.

None of the various forms or legislation proposed so far will serve as a viable option for the multinational corporations that are the most powerful forces in the world today. New hybrids and social enterprises are likely to be used primarily to expand the nonprofit community.

Where the business case for CSR is compelling, the operations of larger, for-profit corporations can be transformed significantly by the adoption of CSR principles. In addition, we must be optimistic that boards and management (with court approval and guidance) will exercise their business judgment in expansive ways that embrace the concerns of stakeholders, broadening company mission beyond a sole focus on return on investment for stockholders.

However, there are two fundamental issues with sole reliance on the existing corporate tools. First, Corporate Social Responsibility initiatives are not likely to stimulate change fast enough to address the major issues facing us today. The current fiduciary duties have evolved though legislation and judicial activism over the past 100 years. Second, given that CSR has only recently been embraced fully by certain large multinational corporations, it is too early to tell if an increased emphasis on employees, community, and the environment can serve to change the fundamental way a corporation operates - primarily because the stockholder remains the sole legally recognized stakeholder.

What changes may serve to effect the greatest transformation of the corporation most quickly?

First, instead of relying on modifications of charters or the creation of hybrids, legislation should create new fiduciary duties - covering both public and private corporations - that favor employees, the community, and the natural environment. The legislation must be federal or adopted nationwide, although one or two states could serve as pilots for the new regime.

The largest obstacle will be creating a means for the board and management to weigh the different and often diverging interests of stakeholders effectively when making decisions.

To ensure accountability, the legislation must include clear metrics to measure the impact of the corporate actions on various stakeholders. One proposal is the analytic hierarchy process developed by Thomas Saaty, which would create a matrix decision-making tool to help in balancing financial and non-financial stakeholder interests.

Second, governments should take action to increase corporate disclosure and accountability on environmental issues. Universal disclosure requirements should be adopted by the world stock exchanges, with NASDAQ, NYSE, AIM and the Tokyo Stock Exchange taking the lead. The effect of a corporation's actions on all stakeholders - including the local and world community, employees, and the natural environment - clearly should be included in the definition of 'materiality'. Stockholders would then be able to evaluate such factors, the expanded impact would be understood more widely, and connections between social impact and long term profitability would become clearer. Enforcement would be critical. Corporations would need to face real and substantial penalties for failure to disclose according to the new guidelines. Fortunately, such a disclosure framework already is being developed through the Global Reporting Initiative sustainability reporting guidelines.

Third, it is vital to recognize that redesigned corporate forms are not the only route to creating corporate responsibility, particularly when quick change is needed. Also needed are new government regulations, particularly to address environmental degradation and climate change. Governments should regulate the environmental impact of all economic actors (including government and quasi-governmental entities), not just private corporations. And they should impose a uniform burden on all companies operating in the U.S., to minimize the likelihood that firms will re-incorporate off-shore to avoid compliance (recognizing that the extra-territorial extension of U.S. laws will not be well received on the international stage and will face enforcement complexities.)

The challenges presented by the inadequacies of current corporate legal forms can and must be solved, for the 21^st century will require corporate forms that incorporate a responsibility to a wide range of stakeholders, not just to stockholders alone. There is a clear case to be made for the creation of new corporate forms, yet the complete answer to the puzzle is not yet fully in hand. Many promising alternatives are already in play, but the ferment of existing experimentation needs to continue, as new ways of thinking about innovative corporate designs continue to evolve.

What's Super about Labor's new GP clinics?

Primary care is the care provided at the first point of contact between a consumer and a health care provider. Typically, this refers to health care that is accessed by consumers directly within their communities, such as general practice, pharmacy, physiotherapy and other allied health services.

Primary care, which places an emphasis on the multi-disciplinary, preventative and well-managed care of a patient, may not result in as many newspaper headlines as hospital emergency departments but there is good international evidence that it does more for the health of our community than even the best run and most well-resourced hospital.

Professor Barbara Starfield from Johns Hopkins University has done extensive cross-national studies of how different countries spend their health dollars. Overall her research shows that countries that invest more into primary care have better health outcomes, lower rates of all causes of mortality (including heart disease and cancer) for a lower overall cost than comparable countries that put resources into other areas of health care such as hospitals and specialist treatment.

While the details of these types of studies can be challenged - there are always issues of data compatibility between countries that make comparisons difficult - what should be taken away from this impressive body of research are the clear general trends she has identified across multiple studies. These clearly demonstrate that independent of the wealth of the country, health determinants (such as smoking rates), and amount spent on health care, countries will do better by focussing more on primary care.

Given that we have a choice about where and how we allocate our health resources, the smart choice is to put funding into the areas that deliver us the greatest benefit. The case for primary care seems clear.

What are the specific problems with the Australian health system that can be addressed through an increased focus on primary care?

First is the issue of the lack of planning and coordination of health care, both across and within different health care sectors, and a subsequent inadequate approach to the prevention and management of chronic disease. For example, people with chronic conditions in the early stages do not receive appropriate care in the community and so go on to develop more serious health problems which require hospitalisation. This makes no health, social or economic sense.

For many common conditions, such as diabetes, arthritis and respiratory diseases, we know what care needs to be provided to keep people in optimum health. Yet instead of making this care easily accessible, we force people with these conditions to negotiate a maze of different administrative, funding and service delivery arrangements to receive the treatment they require. Of course the end result of this is that many people miss out on the best care for their condition - even when this care is not complex or expensive to provide - and so end up requiring more expensive care when their condition deteriorates.

This is why over half a million Australians end up in hospital unnecessarily every year, according to research conducted by the Australian Institute of Health and Welfare. Most of these admissions could have been prevented through better management of chronic disease in the community.

Strengthening our primary care system would take pressure off our over-stretched hospitals, allowing them to concentrate on caring for those who really need hospital treatment.

So how should this be done? In a previous paper for the Centre for Policy Development I argued for multidisciplinary primary care centres to be established to provide coordinated and preventive primary care. Labor's pre-election policy included a proposal for GP Super Clinics, very similar to the model published by the CPD.

 

 

 

 

 

 

 

 

 

 

 

 

These clinics aim to deliver a range of primary health care services, including general practice and allied health, and will be supported with infrastructure funding from the Government. A key feature of the Super Clinics, highlighted in Labor's pre-election policy platform, was that they will focus on delivering more integrated and coordinated care to patients. This should assist in the prevention and early management of chronic disease and reduce unnecessary hospital admissions.

For example, under the current model of general practice, a GP seeing a patient presenting with the early symptoms of Type 2 diabetes has to either manage the complex issues involved with this condition on their own or refer the patient to other care providers (such as a dietician or a diabetes educator) with whom he or she has little contact. From the patient's perspective, this can often involve making additional appointments and travelling to separate locations to see other care providers who do not know the patient's history or original presentation and who treat the patient in isolation from the other care being provided. The aim of a coordinated primary health care service is for patients to be able to receive the care they require from a range of different health professionals working as a team in the one location.

The locations for the first round of the GP Super Clinics have already been determined, with an emphasis on areas with current GP shortages and a low socio-economic status.

These clinics will address some of the problems inherent in our current health system and provide the community with better health care only if they achieve two things: they need to provide both new care and better care, compared to what is currently being delivered.

If they provide the same care as is being provided elsewhere (just in a different setting) or different (but not better) care, then we cannot expect them to result in improvements in health outcomes. They will simply be shifting demand from one area of the health system to another.

Of course access to GP services is a problem for many communities but it is not the only problem. The context in which GP services are delivered is also important.

We have a GP workforce shortage - at least according to estimates based on the way GPs currently practise. This will not change overnight and even recent increases in medical school intakes and GP training programs will not meet the community's needs for health care under our current model.

A better approach is to change the way in which we use our GP workforce. We need to start supporting GPs to work more closely with other health care providers as part of a multi-disciplinary team. Many services currently provided by GPs can be safely and appropriately provided by other health care providers. For example, practice nurses can administer vaccines, dress wounds, perform pap smears and undertake medication reviews. These services would be provided under the direction of a GP and in consultation with the patient. Practice nurses already provide some of these services in some settings in Australia but only to a limited extent - partly because of our current health financing system and the way in which general practices are organised.

Other examples of potential collaboration between primary health care providers include pharmacists assisting medical practitioners with prescribing, counsellors and psychologists working with GPs to treat people with mental health problems and physiotherapists providing manipulative treatment to people with minor injuries.

Increasing support for a team-based approach to primary care should be a major focus of any primary care policies. Using other health care providers to support GPs is not about providing second rate care. In fact, care provided by multi-disciplinary teams can often be of a higher quality and can better meet consumers' needs for increased access to services than care provided by a single practitioner.

The proposed GP Super Clinics should support a multi-disciplinary approach to primary care through co-locating a number of practitioners in the one setting. Often the barriers to greater collaboration between health care providers are simply physical - they don't work close to each other. Changes which enabled Medicare to fund services provided by a greater range of health care providers could further support this approach.

Another positive of the Super Clinics is that they should promote a more preventive focus for primary health care. Currently, GPs have little incentive to provide preventive health services to their practice populations. Medicare is designed to support individual episodic care, rather than population-wide preventive health services. To maximise the benefits of Super Clinics they should be used as a centre for preventive health activities for their community, such as vaccination and screening programs.

Super Clinics also offer the potential to establish more efficient ways of sharing health and medical data. In our current system, the duplication of data collection and entry wastes valuable resources, and results in a large number of medical errors. These clinics offer the potential to develop better ways of sharing relevant data between health professionals - with the consent and involvement of consumers - to achieve better and more efficient health outcomes.

While the number of Super Clinics proposed by the Government is relatively small, they do offer the potential to move primary care towards a more consumer-focussed system that delivers high quality and coordinated care, prevents the development and progression of chronic diseases and reduces inefficiency.

They represent a small - but significant - step along the path of primary care reform outlined by the CPD and by health groups. The way in which they are implemented and evaluated will be crucial to ensure that they promote a better approach to primary care and not simply more of the same. Potential dangers to their long-term success are the possibility that they are seen simply as addressing areas of GP workforce shortages in the current system, rather than as a different - and better - way of delivering primary health care for all - not just the disadvantaged.

CPD will be watching with interest as the Super Clinics are implemented around the country and will continue to research, publish and promote ideas for a better primary care system for Australia.

Regulating for innovation

Regulation can promote beneficial innovation where it addresses clear problems with markets. For example, where regulation internalises the cost of pollution, it will send firms scurrying to find new ways to avoid those costs. The resulting market in pollution abatement will underwrite technology development and innovation, and help reduce pollution. Where we are world leaders in such regulation, our firms stand to become world leaders in pollution abatement expertise - for they and the business ecosystem within which they operate will have first mover advantages.

But much of our current regulation is not like this.

The purpose of this article is to begin a discussion by illustrating some of the pitfalls of our current approach to regulation, and to suggest some building blocks towards a richer approach.

In addition to being flexible when it is introduced - or having what we could call ‘static flexibility' - regulation should also be flexible in an ongoing sense. We might call this 'dynamic flexibility.' Mechanisms should exist to ensure that opportunities for optimising regulation are seized with alacrity. Today, despite twenty years of government policy directed towards improving regulatory performance, this is not the case.

Regulation, regulation review and dynamic flexibility

In contrast to many areas of economic reform, few would argue that we have solved the problem of regulatory flexibility. Indeed, while many talk about the ‘deregulation' of Australia's economy over the past two decades, the bulk, complexity and compliance burden of regulation continues to grow.

There is wide agreement across the policy spectrum that the social objectives of regulation should be achieved in ways that maximise the operating flexibility of those who are regulated. Still, in addition to what we could call ‘static flexibility', or maximising the flexibility of regulation when introduced, regulation should also be dynamically flexible. Like any complex system, regulation will not function well unless it is subject to the kind of continual improvement that good businesses so assiduously cultivate. Currently, few people would regard our regulatory system as dynamically flexible.

This is because in many respects, regulators are not keeping pace with the businesses they regulate. Over the last three decades, business has moved itself out of a ‘Taylorist' mindset in which managers set policies from the top down, often in minute detail, for employees to follow. Regulation and regulation review agencies have yet to fully make this transition to ‘post-Taylorism'.

The existing policy of ‘minimum effective regulation' has established regulatory ‘gatekeeping' institutions to enforce a quality hurdle for all new regulation. Thus, the major focus of regulation review falls on regulation making, rather than on the continual improvement of regulatory systems. Though some emphasis is put on wholesale reviews of regulatory bodies, these are typically policy reviews from outside regulatory agencies, rather than ongoing attempts to optimise the performance of the regulation itself.

The result has been that regulatory systems are a model of unresponsiveness when it comes to the kind of (often small-scale) continuous improvement that is responsible for so much productivity growth in business.

Regulation and regulation review

It appears that in the area of regulation, as in other areas of economic policy, we have come a long way since the early 1980s.

Twenty years ago, regulators were subject to parliamentary scrutiny - at least in principle though, in fact, not on the detail unless it created substantial controversy. They were also subject to general disciplines governing the behaviour of public agencies. But as regulation burgeoned, it was clear something was wrong.

Since 1986, when the then Prime Minister announced the policy of 'minimum effective regulation', every government at both state and federal levels has established a specific institution dedicated to a variety of worthwhile tasks.

At the Commonwealth level, the Office of Regulation Review (ORR) - recently renamed the Office of Best Practice Regulation (OBPR) - and equivalent bodies throughout the states seek to improve the quality of regulation. Their remit is to do so by ‘gatekeeping' - to prevent bad regulation from being passed - and by educating regulators. The OBPR's role is to make regulators aware of the economic aspects of regulation and, in particular, to inure them to a cost benefit framework in all their regulation.

And yet, in contrast to many areas of economic reform, few would argue that regulation review has improved outcomes greatly. Politicians are told of the excesses of over-regulation, and have put effort and resources into the establishment of institutions to deal with the issue. But regulation continues to mount, and much of it is more complex and costly than it needs to be.

Regulation as an exercise in sovereignty - the analogy with ‘Taylorism'

No matter from how far down the hierarchy of government it comes, regulation always remains in essence a form of sovereign command. Further, it is often promulgated to prevent some kind of perceived wrongdoing.

Compare this with the ‘command' of management within a firm. In each case, the source of command generally has sufficient power to enforce its commands, or to find someone who will. Yet there is a powerful difference. While there will always be minimum standards of conduct within the firm, good managers will mostly focus on encouraging and motivating employees to perform at their best. Indeed, good managers will often not command at all. They understand that the firm they help guide is a complex adaptive system.

Good managers spend a lot of time trying to communicate corporate objectives to those they manage; they also seek to introduce systems to motivate employees, and to measure and reward their performance. When management does command, such commands will generally be both offered and understood as conditioned by their purposes. And good managers' instructions will often invite employees to solve problems and to add their own unique knowledge from the ‘coalface' to the ongoing task of improving the firm's operations.

It wasn't always this way. In the world envisaged early in the twentieth century by Frederick Winslow Taylor, the author of The Principles of Scientific Management, managers would scientifically design the workplace and then instruct workers on their tasks in minute detail.

In important respects, the transformation from Taylorism has yet to be fully made in the area of regulation. Policies are decided upon, with or without appropriate consultation, and then, in being promulgated, receive the imprimatur of the sovereign. Though the purpose of the regulation can be of some significance when lawyers are interpreting the meaning of the regulation, what is generally required from subjects of the regulation is compliance with its specific commands, not with their purposes - in other words, with the 'letter' rather than the 'spirit' of the law. Indeed, there is no requirement on regulators to specify the purpose of their regulation, and those purposes may not even be clear.

Table 1: Contrasting two production systems

	Taylorism	Post-Taylorism
Metaphor of Production System	A mechanism designed by engineers	A complex adaptive system
Role of Management	Funding and empowering professionals to design or buy in machinery, products, work routines and work incentives	Eliciting the expertise of all in the productive network (including outside the firm) Richness of feedback, to guide production and continual improvement, high morale and ‘alignment’ of employees with firm objectives
Means of Productivity Growth	Better management, and technology bought in or produced by internal R&D	Organisational learning, through continual incremental improvement at all levels

In the early 1970s, the Robens report on occupational health and safety regulation in the UK was a watershed in regulation. It ‘blew the whistle' on regulatory ‘Taylorism'. Robens argued that occupational health and safety regulation had become a mass of technical rules for workers to follow and inspectors to enforce that were so complex and ad hoc that they were often worse than useless. Not only were they not understood by workers, they undermined responsibility for safety throughout firms by inviting the impression that safety was imposed from outside the workplace.

Robens proposed the first attempt to move beyond what we are calling here ‘regulatory Taylorism'. Firms were to be given general duties of care for their employees' occupational health and safety and they would discharge them by collaborating with their workforce in developing, documenting, implementing and improving auditable safety management systems.

The new style of regulation seeks to use its power of command in a way that is more analogous to good management - it seeks to encourage excellence at the same time as putting a floor, below which performance shall not fall. It seeks to draw out the expertise of the regulated in improving outcomes. And, at least in intention, it takes those it regulates as being in charge of complex adaptive systems which may change over time. It seeks to regulate to improve outcomes rather than specify processes.

Occupational health and safety regulators have sought to follow this approach with some success. There is also some evidence of this approach in some areas of environmental regulation.

Is regulation review Taylorist?

Another approach to the emerging regulatory morass was regulation review. It had its intellectual progeny amongst economic critics of regulation in the spirit of Adam Smith.

One could argue that Smithian sensibilities were revived by George Stigler's pioneering studies of regulation in the 1950s and 1960s, which illustrated how often regulation failed to achieve its assumed objectives - for instance, of reducing monopoly prices to the optimal level. This school produced a powerful critique of the political economy of regulation. It showed how often regulation could be ‘captured' and the public interest subverted by vested interests.

As deregulation has been embraced in many areas of the economy, the policy of ‘minimum effective regulation' was adopted in Australia in 1986. A recent succinct statement of its philosophy was offered by Gary Banks, the Chairman of the Productivity Commission (2003), as follows.

To be ‘good', regulation must not only bring net benefits to society, it must also:

• be the most effective way of addressing an identified problem; and
• impose the least possible burden on those regulated and on the broader community.

Where one might say that Robens' idea was directed towards moving regulation from Taylorist principles to post-Taylorist ones, ‘minimum effective regulation' sought to constrain regulators to regulate as little as possible, consistent with still being effective. Regulatory ‘gatekeeping' institutions were established to enforce a quality hurdle for all new regulation. Regulators were required to produce adequate cost-benefit analysis of the regulation they introduced in the form of ‘regulatory impact statements' which were to be available to cabinet along with coordination comments by regulatory review agencies.

Clearly, ‘minimum effective regulation' is a worthy goal. It would also be wrong to present Robens-style outcome based regulation as some antithesis to minimum effective regulation. Regulation review agencies themselves promote the idea that regulation should target outcomes rather than mandate processes.

Even so, in important respects, the policies of regulation review as we are practising them tend towards a Taylorist conception of regulation. The policy of minimum effective regulation delivered by regulation review agencies regulates regulators - it puts in place specific requirements that regulators are required to comply with. And yet, those requirements relate to the process through which regulation is implemented, not to its outcomes. Regulation review is process regulation of regulators.

Also, regulation review agencies go through many of the dilemmas of regulatory agencies themselves. Should they see themselves as enforcers against errant regulation? Or should they seek to influence and educate those they regulate? Should they be public advocates for minimum effective regulation? Or would this undermine their influence with regulatory agencies?

The problem is that the conception of regulation itself and that of regulation review both subscribe to the principles that we have called ‘regulatory Taylorism'. The major focus of regulation review falls on regulation making, rather than on the continual improvement of regulatory systems. Though some emphasis is put on reviews of regulation, these are typically policy reviews from outside regulatory agencies rather than ongoing attempts to optimise the performance of regulation in achieving its objectives. Indeed, regulatory review arrangements can even impede the continual improvement of regulation.

Table 2: Contrasting two approaches to regulation

	Taylorism	Post-Taylorism	Regulatory Taylorism (Regulation Review)
Metaphor of Production System (regulatory system)	A mechanism designed by engineers	A complex adaptive system	A mechanism designed by policy makers in consultation with stakeholders
Role of Management (regulators)	Funding and empowering professionals to design or buy in machinery, products, work routines and work incentives	Eliciting the expertise of all in the productive network (including those outside the firm) Richness of feedback, to guide production and continual improvement, high morale and ‘alignment’ of employees with firm objectives	Analysing costs and benefits and resulting design of regulation
Means of Productivity Growth	New Technology bought in or from internal R&D	Organisational learning, through continual incremental improvement	Reviews of regulation to find improvements

Regulating for excellence and innovation: Delegated regulatory
entitlement

To encourage excellence, we should seek to relieve firms whose internal systems can demonstrate (and continue to demonstrate) their own excellence from more onerous obligations of general regulation. The Victorian Environmental Protection Act 1970, for example has an accredited licensee system that enables a firm able to show a high level of environmental performance to avoid prescriptive works approval and licensing requirements (Perton, 1997).

However, such programmes have had limited scope and have not had a major impact on regulation more generally. Often, excessive risk aversion is shown in setting such programmes up. The officials involved have little to gain from their success and a lot to lose from any failure or perceived failure.

Regulation typically seeks to vouchsafe some minimum standard of
performance. Yet in doing so, not only does it do little to encourage
adequate and good performers to do better, but its prescriptions
sometimes actually impede the best performers. If we are interested in
improving outcomes – for instance, improved satisfaction of customer
needs or improved safety at work – we should be keen for improvement,
not just where it is unsatisfactory, but wherever it can cost effectively be made. Regulators and legislators should therefore be encouraged to extend the range of prudent experimentation with alternative compliance mechanisms.

Global warming and the case for a coal tax

While carbon trading schemes such as Kyoto might help in the fight against higher emission levels, they are currently insufficient to solve the problems posed by global warming. Not all countries are included and, for example, China's projected carbon dioxide emissions to 2050 are five times what Kyoto will save.

Something else needs to be done. The question is, what?

The problem is one of market failure, in the sense that the market price does not include the external environmental cost of greenhouse pollution. The main alternative solutions are 'cap and trade' mechanisms for emissions control or a carbon tax. A tax would be better but the former has been favoured because there has appeared to be no way that a global tax could ever be agreed upon.

However there is a way that a global carbon tax could be introduced, and Australia would have a key role.

It could start with an export tax on coal. Coal is the most greenhouse polluting fossil fuel because coal is primarily composed of carbon. Most electricity generation world-wide comes from burning coal, and most of China's projected emission increases come from coal fired power stations.

Australia, as the world's leading coal exporter, is uniquely placed to play a key role in implementing a global carbon tax, starting with an export tax on coal. This may be a radical proposal but there is no doubt that a radical solution is necessary. To avoid a catastrophic sea level increase we are advised that we need to reduce global emissions by 50 percent by 2050. The scientific evidence for this becomes clearer by the year. Yet under business as usual assumptions, emissions are projected to increase by 50 percent. Even the best scenarios still show significant increases. We need to do much more.

Trading schemes are not really the market solution that is claimed. There are all sorts of administrative difficulties in setting and allocating the so-called 'permits to pollute' and they do not provide the clear long term price signal that industry needs. By contrast a carbon tax would be administratively simpler, would provide a universal price signal, and would provide revenue that could be used to compensate those who may be worst affected. The key stumbling block is finding a way to implement the unprecedented concept of a global tax.

It may seem counter intuitive that the first step to a global carbon tax can be an export tax on energy goods. But given that demands are inelastic, exporters will collectively gain from the uniform implementation of such a tax. Exporters, or governments on their behalf, acting collectively, can benefit from use of their market power to raise prices, in the form of an export tax on carbon. The idea of an export cartel is of course not new. OPEC was able to prove, at least for a time, that such a cartel could be very effective. The difference would be that implementing price increases in the form of a carbon tax, via a cartel arrangement, as a solution to global warming, is something that could be promoted as beneficial, not self-serving.

Such a tax would ideally apply to all fossil fuels, including oil and gas as well as coal. However, a tax on coal alone, at least as first step, would still be effective. This is because coal is the most carbon intensive fuel and it is also the cheapest and most plentiful. Therefore it would be the most beneficial target for a tax. A tax affecting the international traded price could then be extended to domestic coal markets. Generally, there would be a flow on into other fossil fuel prices.

The initial implementation of a coal export tax would be more feasible than a general tax because the agreement of only a small number of exporting countries would be required and each would have an incentive to participate. The revenue earned from an international coal tax can be used to invest in alternative energy production. A proportion of tax revenue could be used to compensate importers with greenhouse abatement assistance, or tax payments could be used as a credit in other abatement schemes. The export tax would need to be matched by similar domestic taxes on coal consumption and then extended to other emission fuels.

Australia has a key role because it provides almost 40 percent of world coal exports.

Six APEC countries together provide 80 percent of world exports, and three APEC countries consume 40 percent of world coal imports. APEC therefore includes all the major players in the coal trade, including China. Recent discussions at APEC would have been more productive if they were addressed at considering ways to implement a tax on traded coal, as a precursor to a more general global carbon tax.

Studies conducted at National Institute of Economic and Industry Research (NIEIR) indicate that a 25 percent increase in the price of coal exports could benefit the Australian economy by around AUD$4 billion. A tax at this rate would be the equivalent of less than $5 per tonne of carbon dioxide emitted. It provides a window of opportunity for Australia to decarbonise its economy.

It may have been assumed that because Australia is so richly endowed with coal, providing most of stationary domestic energy needs as well as the being the major export commodity, that it would be inconceivable to contemplate that coal reserves should be substantially kept preserved for future generations. Yet it can be seen that such a policy is not only environmentally wise but could be economically beneficial.

Current knowledge of the severity of the possible consequences of global warming, indicate that the situation can justifiably be described as a global emergency. Given Australia's dominant role in the world coal trade, it is incumbent upon Australia to take a leading role in finding a solution to this crisis. The proposals put forward here hopefully provide indication of the direction in which such a solution may be found.

This article is based on a paper presented to the Energy Working Party Conference, NIEIR, Melbourne, July 2007.

Climate change litigation: the heat is on

If it has taken governments so long to accept the reality of climate change, how long will it take them to agree on finding solutions? Will they look for the best way of tackling it, or simply the most politically expedient? Is there anything we can do to force them to act, and to act properly?

On matters to do with climate change our governments have long forsaken objective inquiry, blinkered any capacity for sensible foresight and abandoned intelligent planning.

They are intoxicated by the prospect of short term economic gain, approving environmentally disastrous projects one after another on bases such as economic benefit to the state or country or promises of job creation.

When challenged, they lapse into a mode of thinking that is reflected in Planning Minster Frank Sartor's comments about his approval of Centennial Coal's massive open cut Anvil Hill coal mine:

'... you're talking about 12 million tonnes of CO2, in that order. Half of what the Greens said. However, if Anvil Hill was stopped and we said no to it, the same amount of greenhouse gas would still be pumped out....You're asking, give New South Wales a political whack, an economic whack, in other words - punish New South Wales economically by saying "no" when there's no genuine environmental benefit in global warming.'

A coherent and convincing argument? What more is he saying than, 'if we don't do it someone else will, and we want the money'? It's interesting that a similarly dismissive approach was taken by the assessor from the federal Environment Department who gave the Anvil Hill project the green light last year, finding that the combustion by end-users of all the coal produced by the proposed mine would produce per annum the equivalent of 0.04% of the current annual global greenhouse gas emissions. What is extraordinary is her conclusion:

'...in light of the relatively small contribution of the proposed action to the amount of concentration of greenhouse gases in the atmosphere, I found that a possible link between the additional greenhouse gases arising from the proposed action and a measurable or identifiable increase in global atmospheric temperature or other greenhouse impacts is not likely to be identifiable.'

She also found that greenhouse gases emitted in the course of extracting and transporting the coal 'were likely to be negligible in the context of existing emissions'. Now, one 25th of 1% may sound small, but not when you consider the magnitude of the whole: some 8 billion tons of CO2 are produced each year from burning fossil fuels, and .04% of that is more than 3 million tons. Further, being superficially small does not mean that it is inconsequential. If the then Environment Minister Mr Turnbull could rely on this argument to give Anvil Hill the go ahead, how could he tell us in the same breath to change our lightbulbs? If we all adopted the approach our government dictated for industry then we should do absolutely nothing to rein in our habits: if Anvil Hill's impact is unidentifiable, our individual impacts are minuscule.

When the Federal Court upheld Turnbull's delegate's decision in September last year, Judge Stone seemed to accept that assessment. In fact, the requirement for identifiable or significant impacts was cemented into the Federal Environment Protection and Biodiversity Conservation Act 1999 by a Howard government amendment pushed through Parliament in February 2007. 'Impact' is now defined in a way that prevents this legislation from being used as a vehicle for public interest groups to hold government and industry accountable.

So notwithstanding our governments' belated concern about coal-fired power generation and global warming, the powers that be are intent on ramping up our coal production. In December 2006, the Australian Bureau of Agricultural and Resource Economics released its report ‘Australian Energy National and State Projections to 2029-30' which projects, amongst other things, that 'Over the medium term, Australia's total coal exports will grow at the average rate of 4.4 per cent a year, reaching 300 million tonnes by 2010-2011. Beyond the medium term (between 2011-2012 and 2029-2030), coal exports are projected to increase by a further 50 per cent to 438 million tonnes in 2029-30.'

The report is worth reading because it actually seems to be a genuine attempt to make informed, objective and accurate predictions about energy production and use. It is also interesting that there was never any question in the mind of the report's authors that the anticipated output of Anvil Hill and other proposed mines should be included in their projections, despite community protests, active litigation and the lack of formal approvals at the time they were writing. Perhaps it's not so difficult to make accurate predictions about the inevitable!

Each time our leaders (at all levels) are questioned about their plans to tackle global warming or their approval of questionable developments, their responses are always conditioned by concern about 'the economy'. Perhaps they should refer to the December 2006 CSIRO publication ‘The Heat Is On - The Future of Energy In Australia' where all of the scenarios modelled predicted that both the Australian and world economies would continue to experience strong economic growth while carrying out greenhouse gas mitigation.

Unfortunately, there is no constitutionally enshrined obligation for any elected representative to act or to serve or to represent the best interests of all people in all parts of the community. Keeping politicians aware of their obligations rests with individuals and community groups. Absent political will and leadership, and positive action such as immediate mandatory requirements that companies and governments reduce greenhouse gas emissions, people are seeking their own solutions to official inaction. All over the world public interest advocacy groups and individuals, and even governments themselves, are looking at legal mechanisms to compel corporations and governments to address global warming issues.

 

 

 

 

 

Photo courtesy of John Perivolaris.

Governments are already involved on both sides of climate change litigation, as is illustrated by two recent United States decisions.

The first involved 12 US states and 13 environmental groups suing the United States Environmental Protection Agency (EPA) to force it to regulate carbon dioxide and other greenhouse gases as pollutants. The Bush government contended that the EPA did not have that authority, but on 2 April 2007 the US Supreme Court ruled - by a slim majority - in Massachusetts v. Environmental Protection Agency, 549 U.S. (2007) that the EPA's refusal to regulate greenhouse gas emissions from cars was 'not in accordance with law'. Apart from forcing the EPA to deal with the matter properly, the decision is important because the petitioners were found to have standing to bring the proceedings. Unfortunately, however, the effect of the decision is not to resolve the problem but to send it back into the bureaucracy: New Scientist recently reported that a spokesperson for the EPA told it that setting emissions standards 'is still in deliberation' and that 'it could be quite some time' before a decision is reached. Sound familiar?

In the second case, the State of California sued six big car manufacturers - General Motors, Ford, Chrysler, Honda, Toyota, and Nissan - about costs it will face because of climate change. On 17 September 2007, federal judge Martin Jenkins dismissed the action on the basis that 'the complaint raises non-justiciable political questions'. Saying that issues of global warming and emissions standards are, at least in the first place, political rather than legal questions again puts the ball back in the regulators' court: as California's supervising deputy attorney general, Ken Alex, said, 'Right now, because the political branches - the federal government, Congress, and the executive branch - have not acted, the state of California is left without a remedy.'

These cases may not be resounding victories but they are important early steps: for example, the Supreme Court decision on standing is helpful to litigants, and the California decision makes it very clear that responsibility for action lies squarely with our elected representatives.

And fortunately California is persisting: it has now filed a lawsuit to secure United States Government approval of the State's 2002 legislation that requires automakers to reduce vehicle emissions by 30 per cent by 2016. For the law to take effect, California requires approval with a waiver from the EPA which has not been forthcoming despite a request being filed in December 2005.

Within Australia, there is also concern in local government circles about litigation involving the consequences of climate change, such as rising water levels.

Governments at all levels risk being sued, probably mainly for failing to prevent polluting activities within their jurisdiction or failing properly to take environmental impacts into consideration when planning. But even national governments are potentially exposed to actions based on their failure to fulfil their legal duties under either international or domestic law.

In 2002, for example, we saw Tuvalu's Prime Minister threatened to commence legal action against Australia and the United States before the International Court of Justice.

As recently as September 2007 Tuvalu Deputy Prime Minister Tavau Teii called for urgent action to address climate change because the island nation is slowly being inundated as the ocean rises, citizens are fleeing and studies predict that at the current rate the ocean is rising Tuvalu could disappear in the next 30 to 50 years.

Other impediments to direct action by persons affected, such as the daunting cost of litigation, also appear to be falling away. There are inherent difficulties and considerable expense involved in linking climate change to a corporation's activities - including providing scientific evidence that a corporation's activities have contributed to climate change and in quantifying such a change, especially after the previous federal government rejigged the definitions. However, the expense of climate change class actions may have become less of an obstacle after the High Court's decision in Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd, which seemed to clear the way for litigation funding.

Government and corporate wrongdoers and their officers should now be able to see the forces massing against them. And they should be concerned, because they may well be paying any damages out of their own pockets. Insurance companies were one of the first commercial sectors to see what is coming with global warming and its potential for undermining their entire industry. Their nervousness is apparent from the fact that coverage for liability for pollution and environmental impairment are already excluded in some directors and officers policies, and those and similar exclusions are likely to spread.

The Howard Government belatedly acknowledged climate change as an important issue, but only because the polls indicated high levels of public concern, and it was therefore politically expedient to do so. They then moved to the next phase, which involved reports, reviews, exploring options, talking a lot, making empty promises, entering useless 'agreements' like the APEC Sydney Declaration and doing altogether too little, far too slowly. Howard's 15% 'clean' energy target was a prime example: the target was too low, it's expressed in megawatt hours rather than true percentages of overall consumption, the definition of 'clean' was highly contentious and, as critics pointed out, the 'plan' didn't actually increase the renewable energy component from what we have now.

The Rudd Government seems to be on a stronger course with its immediate ratification of the Kyoto Protocol, but it seemed to be hedging its bets at Bali and we still have to wait for yet another report before we will have any real idea of what position it will take. The sad fact is that our State and Federal Governments' coffers depend so heavily on taxes and royalties from deleterious economic activities that there is a strong temptation not to upset the applecart. The prospect of climate change litigation should add to the many other arguments to ignore this temptation and take strong and early action.