Date created: 28 November 1996

Last modified: 18 November 1997

Maintained by: John Quiggin
John Quiggin

From quango to qango and back again

Sydney Morning Herald ,

7 April, 1995

The term 'quango' has had a curious history. Once, there were only NGOs, non-government organisations like ACOSS or the RSL. However, it was observed that many so-called NGOs were closely tied up with government, often operating in a symbiotic relationship with the government agencies with which they regularly dealt. In addition, particularly in the US, there has been a practice of creating nominally private business organisations, with effective government backing, to perform what would normally be regarded as public functions. The Federal National Mortgage Association ('Fannie Mae') is an example. The term 'quasi-NGO' or 'quango' was coined as a mildly pejorative description of these hybrids.

When economic reformers in Britain, and later in Australia, wanted to cut back the profusion of statutory authorities, they decided to appropriate the term to their own use. Unfortunately the acronym didn't quite fit. Statutory authorities could reasonably be described as quasi-autonomous governmental organisations, but there was no easy way to use the letter 'N'. Eventually they settled on 'national'. This was logically redundant in the case of the UK and simply incorrect for Australia where most statutory authorities are run by State governments, but it worked. Some users took the process to its logical conclusion by dropping the 'U' and writing about 'qangos'.

As a piece of etymology, this is all well and good. What is more interesting is that the process of economic reform is turning qangos (in the new sense) into quangos (in the old sense). Take for example, the Sydney Harbour Tunnel. Before the days of micro-economic reform (and public sector borrowing targets), this would have been built under contract for the RTA, who would have collected tolls and paid them into consolidated revenue. Now it is supposedly the property of a private company who have constructed it under a BOOT (Build, Own, Operate, and Transfer) contract, under which the tunnel is to be handed over to the State after a set term. As is usual with BOOT contracts, the apparent free lunch disappears on closer examination. The State government threw in the right to collect tolls on the existing Harbour Bridge as part of the deal.

The really interesting question, however, is whether the tunnel is now genuinely private or not. The NSW Auditor-General thinks not; the contingent liabilities faced by the State under the BOOT contract are such that the Tunnel should be listed as an asset in the public accounts. The State government is not quite sure. With the mantle of 'commercial confidentiality' that typically shields questionable public sector financial transactions nowadays, it is almost impossible to determine the true story.

Examples of this kind could be (and are being) multiplied endlessly. When government business enterprises like water authorities are privatised, the result is frequently not a competitive firm, but a monopolist with profits determined more by government policy than by market performance. Such enterprises typically require close regulation to prevent exploitation by consumers. At the same time, they are so vulnerable to adverse policy decisions that buyers typically require advance guarantees of a favorable policy climate. Finally, the services provided by such firms are often such that they are 'too important to fail'. In effect, this ensures that bad business decisions will result, not in bankruptcy and ruin, but in a public bailout. The term 'quango', in its original sense, has never been more appropriate.

John Quiggin is Professor of Economics at James Cook University and author of Great Expectations: Microeconomic reform and Australia, published by Allen & Unwin.

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