How Not to Reinvent the Wheel

The article below, on the deep structural reforms successfully instituted by successive Australian governments over the last 25 years, and translated into English from the original Greek was published today, Sunday, 19 February 2012 in the Kathimerini newspaper. We believe Australia’s experience is a useful case study of how reforms can be implemented successfully both in the economy and across a country’s public sector. The lessons are many, but the key concept is simple. The reform process must be continuous and sufficiently broad in scope to allow a positive synergy, meaning that key structural reforms in the functioning of the economy and labor market have to work together with improvements in public administration. Australia was of course not a member of a currency union, meaning it had a broader range of macroeconomic and financial policy options than Greece does today. But it struggled with a large, expensive and inefficient state bureaucracy for many decades before finally reinventing it to serve the public’s interest and to support investment and development.

Lessons learnt in Australia for Greece

By Jenny Bloomfield*

Many ask what the steadily rising achievements of the Australian economy and the unprecedented prosperity that the country is experiencing today is due to. The answer is that because of the implementation of painful and radical reforms, we were able to reconstitute our economy and to be now in a position to take advantage of our natural resources in the best way possible and thus to benefit from the economic boom in our region.

In the 80’s and 90’s, Australia underwent an exceptionally painful period of economic restructuring in order to adjust to a new world economic reality, dramatically reducing protectionism and opening up key sectors of the economy to competition. The high cost of protectionism and the support provided to non-productive and non-competitive industries weighed heavily on the consumer who paid dearly for goods and services, as well as on our most productive and export-oriented industries. After 25 years of implementing structural reforms which led the way to two decades of continuous economic growth, Australia has changed significantly.

We strengthened competitiveness by investing in innovation and by increasing productivity. We reduced bureaucracy and the cost of business activity simplifying state procedures whilst in parallel strengthening incentives for people to work. We institutionalised a flexible framework of industrial relations and closely linked salary variations with productivity increases, which was instrumental in increasing employment levels and decreasing inflation.

We opened up the local marketplace, including the state monopolies and state-controlled businesses, to competitive forces, a factor that was a catalyst in increasing productivity. We helped surplus personnel in the workforce to integrate into more productive sectors of the economy through re-training and the acquisition of new skills.

These changes had the immediate effect of increasing the GDP, as well as the establishment of a more flexible, active, dynamic and efficient economic system. The increase in state revenue made it possible for the Australian government to continue improving its social security program. A re-structured, rationalised and effective public sector and open, transparent, accountable institutions made it possible for structural reforms to take place resulting in an improvement of public governance in Australia.

With focused reform measures for the improvement of the administrative framework of state institutions, we strengthened accountability, transparency, the state’s ability to respond to the needs of the citizens and the seamless operation of public services, harmonising the outcomes and productivity of the public sector with the private sector. We gave greater autonomy to public organisations, whilst legislating in parallel a framework for strict criteria of performance evaluation and accountability based on the achievement of predetermined targets and outcomes.

The diligent monitoring of the economic activity and the performance of public organisations contributed substantially to their improved status and better outcomes. Successive governments continued to implement a series of reforms which aimed to maintain and to improve the performance of the Australian economy in the fields of competition policy and productivity, industrial relations and flexibility in the marketplace, public administration, education and investment in innovation and the so-called “knowledge or information economy”.

The Australian people understand the difficult adjustment which the Greek people are currently undergoing to bring the country back to a healthy and robust economic status which will ensure the long-term prosperity of all citizens. The most significant lesson resulting from our experience is that the difficult adjustment program can be implemented successfully as long as there is collective support for the necessary changes and determination to achieve the results.

* Mrs. Jenny Bloomfield is Australia’s Ambassador to Athens.

Original article here, in Greek:

This entry was posted in Public administration, Reform and tagged , by Solon. Bookmark the permalink.

About Solon

First coming to prominence for his patriotic exhortations when Athens was fighting a war against Megara for possession of Salamis, Solon, a lyric poet who came from an aristocratic family which traced its ancestry back 10 generations to Hercules was elected eponymous archon in 594/3 B.C. Solon faced the daunting task of improving the condition of debt-ridden farmers, laborers forced into bondage over debt, and the middle classes who were excluded from government, while not alienating the increasingly wealthy landowners and aristocracy. His eventual just reform measures pleased neither the revolutionaries who wanted the land redistributed nor the landowners who wanted to keep all their property intact. Instead, he instituted the seisachtheia by which he canceled all pledges where a man's freedom had been given as guarantee, freed all debtors from bondage, made it illegal to enslave debtors, and put a limit on the amount of land an individual could own. No less daunting are the reform challenges faced in Greece today.

4 thoughts on “How Not to Reinvent the Wheel

  1. Australia has the good fortune of holding boundless mineral resources which are in great demand by the developing/manufacturing quarters of the world (and by nuclear arms builders). If you want it we will sell it to you. Without this bounty I wonder how well off it would be economically. The mining boom is the only boom happening here. Since the disbanding of industry tariff protection in Australia in recent decades there is scant manufacturing industry left in any sector. I doubt it has become a bastion of economic efficiency or a that anything too economically or politically progressive really goes on here. In Melbourne we are denied public transport to the airport because a government funded study concluded last year that the commercial car park would suffer considerable income loss. No mention of any ecological impact or service to the community was ever made. Big business are the clients and the government is primarily in its service. The lie that government accountability has been improved is palpable in the face of the desalination plant being built here at the most exorbitant service delivery charge in the world while the major consumable in the process electricity is on tap next door running of the largest brown coal fields in the world. The details of the deals between government and private capital are entirely secret under provisions of public/private special legislation. Most major public capital works are hatched in such a clandestine format here now. Labour reforms have also largely benefited business and not workers. The ruling hegemony of four banks in the country are sacking thousands of people at the moment and outsourcing their replacements in the developing world though they have posted record profits last year and only did so from having vanquished all competition in the retail banking game through exclusive government guarantees of their capital holdings during the GFC. Do they feel any obligation to the Australian public that made or bolstered them through the crisis? Fat chance.

    Yes it’s not as corrupt as Greece but lets not pretend it’s a fine democratically managed utopia. It is a gravy pot for multinational corporations and we live off the drippings they trail on the way out of the country with our assets. Rudd was right to attempt his resources tax. It was not right that he was deposed for it. Who is really in control here?

    The government in Australia has garnered proficiency in recent decades in tax collection and revenue generation and collection. Tax and welfare cheat policing technology through computerised data matching, the introduction of the GST, the exponential growth of institutionalised legal gambling, (maybe now the highest per capita in the world), traffic infringement fines, real estate transfer stamp duties during a booming real estate market, introduced land taxes … et al have kept the coffers overflowing. Maybe Greece could learn from this if from anything in the Australian experience. Make the church also contribute from it’s vast asset holdings of real estate. But really it’s probably too late for Greece to stop playing the truant school kid and grow up. Greeks are too cute as naughty children. Thats why tourism is booming there especially right now I reckon. We want to see real Greeks in the wild before imminent extinction…

    It does seem that Greeks have no will to commit to any public edifice of society though they all pretend to be so politicised. They don’t trust government enough to mutually contribute to public welfare through tax payment nor to partake of rational moral government business practices to break the vicious cycles of graft and corruption.

    What will happen when everyone abandons ship there? Maybe China can buy the mainland while Turkey gets the Islands it covets and Greece get another two moutzes from the whole world. You have to admit they have been given every chance and every warning by the school principals. If they wanted reform they would have made some significant efforts by now. It was a simple test and they totally flunked it.

  2. Yes, some negatives are likely to result from higher liberalization and implementing reforms. Yet they would be worth it. A larger private sector in Greece could, as experienced in Australia choose to sack employees or move jobs abroad. As mentioned these changes are necessary to maintain competitiveness and innovation. In contrast, what would be the good of keeping these employees on the government payroll of an increasingly noncompetitive inefficient industry? Higher public debt and a balance of payments deficit? Profitable banks are able to provide higher tax revenue. IE What Greece needs. Labor reforms here have indeed benefited employers. Boosting production and efficiency. IE what Greece needs to do.

    Irrespective of mineral resources, reformed liberal economies usually fair better. This has generally been the case worldwide for many decades. It has no doubt been a major factor contributing to Australia’s prosperity in recent times. Consider economies with comparable mineral wealth which are highly bureaucratic and centrally controlled. EG Venezuela, Bolivia, Iran and Russia.

  3. Pingback: Noli Irritare Leones » What structural reforms is Greece being asked to make?

    • Under the Memorandum covering the latest loan agreement Greece has an obligation to carry out numerous structural reforms including, but not limited to the following:
      – Changes in the labour market to make Greek industries more competitive by reducing the cost of production.
      – Deregulating and opening up to full competition of “closed shop” professions such as lawyers, pharmacists, notaries, engineers, taxi owners, truck owners, accountants, etc.
      – Privatising state owned utilities and activities which are non-core government business and opening them up to competition. e.g.The electricity supply monopoly (PPC), gas supply company (DEPA), water utilities (EYDAP), the monopoly train services operator (OSE) etc.
      – Privatisation and development of other state assets such as the old Athens airport.
      – Changes in the judicial system to speed up the administration of justice and clear the enormous backlog as well as reforming the structure of the judicial system to improve the quality of outputs.
      – The introduction of professional managers in universities, introduction of a professional evaluation process for staff, faculties and academic standing in accordance to world standards.
      – The introduction of performance evaluation for the country’s public servants (at present there is none) and the overhaul of public governance generally.
      – Reforming the public health system by introducing accounting practices and book-keeping in public hospitals as well as ensuring transparency in the supply of pharmaceuticals.
      This is only a short listing of some of the structural reforms called for. The actual requirements are much more comprehensive.

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