Date created: 15/11/08 3:02 PM
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John Quiggin

Balancing promises and risks

John Quiggin Australian Financial Review

10 April 2008

Having been nominated and invited to participate in the 2020 Summit, I have a more personal interest than usual in whether this exercise turns out to be a worthwhile innovation or a waste of time.

Some criticisms can be dismissed fairly easily. It’s true that the number of attendees representing the Opposition is limited. But even assuming that the Liberal and National parties are brimming with ideas, would they really want to set them out in a forum where the government can appropriate the best of them and dismiss the rest?

The absence of many figures associated with the Howard era is similarly unsurprising. Howard’s supporters had 11 years to put forward any policy ideas they might have had, and their contribution was modest. Workchoices, the one big idea of Howard’s final term, is already off the agenda.

Looking at economists, the group I know best, it does not appear that rigid ideological tests have been applied. Those who have been invited range from social democrats like myself and Bruce Chapman to classical liberals like Andrew Norton. The one factor that seems to predict success in this group is participation in public debate, most notably through blogs. Other prominent economist-bloggers in attendance include Andrew Leigh and Joshua Gans.

The biggest single danger is not ideological homogeneity but the inevitable desire to attract a consensus statement from a large and diverse group, all with their own ideas to push. Any consensus arising from such a large group would inevitably consist, at best, of meaningless platitudes and, at worst, of undisciplined wishlists.

Organizationally, it will be necessary to break down the unwieldy groups of 100 into smaller groups with a tighter focus. Only then will it be possible for new ideas to get more than a cursory discussion.

In some cases, the problem is not so much the need for new ideas as the need for government to act on ideas that are widely accepted. In my own research area of water policy, there is near-unanimity among economists and environmentalists on the responses needed to resolve the current crisis.

We need a reduction in total allocations of water, removal of barriers to urban-rural trade, and the repurchase of irrigation water rights for environmental flows. As regards urban water, there is general agreement that prices must play a bigger role in matching demand and supply, though rather less agreement on the appropriate role of restrictions on water use.

Within this broad framework, participants will have a range of different ideas for ways in which the necessary transition to a sustainable policy might be achieved. For example, I will advocate a minimum personal allowance of water, with a fixed charge for all use beyond this, to replace existing household allowances and multiple block tariffs. Others will have different ideas. If it works well, the summit will provide an opportunity to sharpen the associated reasoning and present government with a set of alternatives.

Much the same is true in relation to climate change, the other area in which I hope to contribute. The Howard government spent years denying the problem was real, and years more trying to evade the inevitable point that any effective response required a price on carbon.

Labor has made a lot of progress, but has still to resolve the contradictions created by its opportunistic election campaign claims that motorists are being overcharged for petrol. Of course, there’s no logical inconsistency between the claim that oil companies are overcharging and the policy conclusion that the price of petrol has to rise. Still, the government has yet to address even such basic points as restoring the indexation of fuel excise, let alone the many complexities of an emissions trading scheme.

The 2020 Summit has both promise and potential risks for the Rudd government. The promise is that it can shake up the policy agenda, allowing the government to embrace new ideas that would normally fail to get past the various gatekeepers (including those in the media) who set the allowable terms of public debate. The risk is that, faced with clear agreement on the need for action in areas like water and climate policy, the government will find itself unable to overcome the numerous policy shibboleths and entrenched interests that oppose such action.

Holding the summit does not commit the government to following any particular recommendations that might emerge, but it is an implicit commitment to take bold measures where they are needed. Participants and others will be watching to see whether their efforts have been worthwhile.

John Quiggin is an Australian Research Council Federation Fellow in Economics and Political Science at the University of Queensland.

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