An Economy is Not a Society (8 page)

Take education. When the Rudd government was first elected, education was arguably its most important policy area. Rudd promised us nothing less than an ‘Education Revolution'. Here is how the special Education Revolution statement in that government's first budget opened: ‘Investing in education is crucial to driving productivity growth and to building a modern and prosperous economy for the future.' As an opening statement, it was revealing indeed of the government's real priority. Not education. Not the nobility of learning or the ideal of transmitting knowledge to the young. Not even the social-democratic idea of promoting equality. In fact, the true priority did not relate to anything inherent in the idea of education itself. No, it was all about productivity.

As a speechwriter employed by numerous federal departments between 2007 and 2013, I witnessed this unfold day by day. Almost every speech draft I worked on would come back with the same instructions. ‘Please,' it would ask, ‘add in Krugman's line about productivity.' If you don't know it, here it is (although having been commanded to write it so many times, I find it almost painful): ‘Productivity isn't everything, but in the long run it is almost everything.' Because it came from Krugman, a Nobel Prize winner and a grand man of the Left, the sentence had been elevated to the status of an unquestionable maxim, like ‘what goes up must come down'. But question it for yourself. ‘Productivity is almost everything?' Being thus qualified – ‘almost' – it sounds so reasonable, doesn't it? I say no, on two counts.

The first is that the concept itself is largely a definitional nightmare and, ultimately, a statistical nonsense. It seems simple enough at first. The most commonly used productivity measure, ‘multifactor productivity', measures the efficiency with which an economy converts inputs (given amounts of labour and capital) into outputs (goods and services). But it's not actually that simple. For a start, determining the level of productivity at any one time relies on estimates of inputs and outputs whose accuracy is often highly uncertain. Then there is the problem of determining what causes productivity to go up or down. Are rises in productivity produced mainly by technological advances, as the Left prefers to think, or by microeconomic reform which sweeps away inefficiencies and squeezes more from the workforce, as the Right argues? No one can say – it's purely a matter of your political point of view.

Then there are the paradoxes produced by the fact that productivity is a ratio involving continually changing variables. So, for instance, productivity can fall when investment in new plant and equipment increases (as it did during the mining boom, when our economic growth was the envy of the world), and it can fall when higher numbers of people are employed to produce more things (as it did during the great boom years of the 1960s). When unemployment increases, so can productivity if output remains stable or goes up. And when employment increases, productivity can go down unless output increases by more. It's easy to see, therefore, how productivity can trump full employment as a national objective, even though the latter has greater moral worth and popular support.

Productivity can also fall when we regulate for a cleaner environment and produce boutique ‘artisanal' products of higher quality that people want to buy (like hand-crafted beer); conversely, it can rise when we pollute our air and drink tasteless generic lager. As I have mentioned, because productivity is essentially a ratio, these sorts of paradoxes are to be expected, but this can lead to absurd situations – including the ultimate absurdity whereby our economy can produce less with a much higher rate of unemployment and still see productivity go up.

So it's possible for a nation to be poorer and more productive at the same time. It shouldn't come as any surprise, therefore, that Australia has managed to come out of thirty years of economic reform with higher productivity but still have places like Doveton, where unemployment is through the roof and many people are unable to produce anything at all. It wouldn't surprise me if the productivity of the Doveton economy has gone up even as its neighbourhoods lie in ruins – in fact, it would make perfect sense. The fact is that productivity has limited use as a guide to what we should do as a nation because it is devoid of all moral content.

Given all this, it's no wonder that even the Productivity Commission itself can't agree on exactly how the concept should be measured – and if it can't be certain, how can we? Certainly the general idea of economic efficiency has its logical attractions, but to propose widespread economic change solely on the basis of a concept as impossible to define and measure as productivity is the height of insanity.

The second count against productivity is that there are so many priorities of government – even so many
economic
priorities of government – that, far from being ‘everything' or ‘almost everything', productivity is, arguably, almost nothing. Let's set aside the thousands of legal, administrative and technical things we expect governments to do in our name and consider only the numerous economic ones. We expect governments to raise revenue and manage the nation's finances responsibly; to raise loans in order to finance investment, and to pay them back; to ensure that our schools and hospitals and other services are well funded; to stop bridges from collapsing, roads from developing pot holes and ports from rotting into the waves; to reduce the extremes of poverty and wealth through progressive taxation and a sound welfare system; to keep an eye on the balance of trade and stop it from ballooning in either direction; to prevent recessions; to keep interest rates at optimal levels; to keep inflation in check; to keep unemployment down; to stop the currency from getting too high or too low; and so forth. And yet so many of our economists think that everything must come second to continuing economic reform, as measured by the statistical phantom of productivity increase. It all reminds you of a cricket coach so lost in the data spewing out of his computer that he forgets that the idea is to win the game by scoring more runs than the other team.

One might argue that, in the pursuit of rising productivity, we sometimes stuff everything else up; numerous highly productive American cities with competitive business taxes and low minimum wages but bankrupt budgets, crumbling infrastructure and mass poverty can attest to that. Does this mean that raising productivity isn't an important goal of government policy? Of course not. Efficiency has its place. Within selected government departments there could usefully be units working on strategies to make our nation more productive in various ways, but even within the Department of Treasury this should be a boutique task in comparison with the core jobs of managing the nation's finances, creating jobs, fighting inflation and so forth. To judge everything else – fiscal policy, employment policy, living standards and social equality – according to what it means for productivity is folly. And for a party like the ALP to reduce its social-democratic quest to the morally and emotionally empty goal of raising productivity is the slow road to political suicide. People will follow Labor to the barricades in defence of the ideal of equality, but not for the productivity ratio.

There is no surer sign of the weakness of this managerialist approach to politics than that it has already hardened into a template. Examine almost any major policy idea these days – it might be designed to improve the performance of early childhood education, schools, universities, hospitals, rail transport, freight delivery or a dozen other things – and you will find a similar formula. Announce a national goal of achieving universal access to a certain minimum standard; set new performance targets; establish a framework against which to measure service standards; define the sort of data that would be useful to achieving this; introduce a data-gathering process; publish the data on a public website to put pressure on the service deliverers and create a market with perfect information; link this data, perhaps in the form of statistically modified league tables, to new pools of quality-assurance funding to correct failure; and, finally, set up peer-to-peer information sharing among the relevant professions to drive continuous learning.

This sort of thing, bought off the shelf from the large management consulting firms, seldom works. The data may get collected and published, eventually, but the necessary funding to make it all work and achieve the promised results never seems to appear. The Gonski school reforms are the greatest and saddest example of this, but far from the only ones. It's managerial fantasy by formula, and only serves to stop politicians from thinking about what they should really be doing.

If you watch our politicians talk about reform policies like these, you seldom hear simple statements of common logic, belief, ideology, philosophy, morality or even emotion. All you hear is them flipping over in their minds the PowerPoint slides the consulting firms have devised using the logic, symbols and priorities of managerialism. The following fictional exchange would be typical:

You know the rest. Devising policy like this makes perfect sense to the managerialists in charge of our reform processes, but the people can see through it. And that's why they are switching off in large numbers and seeking answers beyond the major parties.

Let's think about what the managerialists have done to our language. This is an easy target, admittedly; lampooning managerialist sludge has itself descended into cliché, and I won't do it here. It suffices to say that when policymakers talk about ‘inputs', ‘interventions' and ‘outcomes', and especially about ‘productivity', they're not talking about real changes to the way we live. They're talking about the symbols, abstractions and data they use to measure and represent the results of these changes. It's a new language that is altogether different from the one ordinary people speak: words become numbers, verbs become processes, poetry becomes two-dimensional and prose becomes PowerPoint. It's dull and alienating, obviously, but it does more than simply damage a government's ability to communicate with the people (which in a democracy is serious enough); it also stops a government from having any true purpose at all.

Recently, nearing the end of an election campaign, I heard a party leader answer a question about what sort of government there would be should he win by saying it would be ‘a government focused on outcomes'. To any political leader, this sort of thing makes a rough sense, being shorthand for ‘we won't be ideological or extreme but moderate, sensible and middle-of-the-road, and we will keep our promises', or some other variety of blandness. But to the rest of us it is meaningless. In this case it was proof that the prospective new government's priorities would be little more than those the management consultants could redefine, measure and tick off. Hospital waiting lists down – tick. Suburban train delays down – tick. Spending on school maintenance up – tick. And so forth, all while horror stories about postponed operations, late trains and demountable classrooms continue.

Dependent on their policy advisers, such politicians are like the prisoners chained to the wall of Plato's metaphorical cave: they see and hear only abstract representations and echoes of political, economic and social reality. From the perspective of the policymakers – who have never left their caves, never spent much time in places like Doveton and therefore have never seen what effect their ideas have on the lives of actual people and communities – their formulas and ideas are unquestionable, the height of wisdom itself, and opposing them seems completely irrational. If we just get rid of the minimum wage and penalty rates to make workplaces more flexible (or put a ‘price signal' on visiting a doctor and extend the GST to cover food, or let the market determine the level of university fees, or test every school student and put the results on a website, or get rid of subsidies to manufacturing and buy our vehicles and submarines and processed food from other countries, or remove the restrictions on the importation of foreign labour), then we will attain rising levels of economic productivity, win the praise of Paul Kelly, be compared to Paul Keating, have a graph that rates high on both the vertical and the horizontal axes simultaneously, and be considered truly great.

There is only one way to proceed: we must heed Robin Williams' call, take the ‘Framework for prioritising economic reform' and
rip it out.

To understand what's really going on in our economy and our society, we need a better language than the one on offer from the managerialists, one that tells us the truth but hasn't had the important elements of human feeling sucked out of it. It wouldn't hurt occasionally to listen to artists.

In literature, the past is usually one great eternal summer. To George Orwell, writing between his mid-thirties to mid-forties (roughly 1939 to 1949), childhood represented not just carefree youth but a past that he was certain was superior to the present. Yes, it included coal miners coughing their lungs up in rain-swept northern villages, men doffing their caps in the presence of the landlord or the boss, and the thin red line protecting the opium monopoly in some far-flung colony. But the countryside had not yet been overrun by suburbia – Orwell's detested ‘villa-civilisation' – with its motorways and faux Tudor pubs. Sturdy carthorses grazed in open fields; dace still swam in unpolluted streams and ponds; beer still tasted like beer; the Great War hadn't killed a million Englishmen; the Great Depression hadn't reduced the working class to starving beggars; totalitarianism, with its propaganda and surveillance, hadn't been thought of; and the Luftwaffe hadn't turned London into a rubble heap. The things we now consider unquestionable benefits of scientific and technical progress – which prolong our lives, keep us warm in winter and cool in summer, and allow us to travel the world for a few thousand dollars – had not yet arrived, meaning that, to the majority, the idea of ‘progress' was largely theoretical, a swindle, a bringer of mass destruction. Looked at in this way, Orwell had a point. He called this memory of the past ‘the Golden Country', and it is central to the meaning of his best novels,
Coming Up for Air
(1939),
Animal Farm
(1946) and
Nineteen Eighty-Four
(1949).