Adaptive Organisation

Outside of the arguments of political parties, ideologies, policies etc; government is predominantly an administrative structure. We would expect government to be relatively fluid as it changes in size, shape, boundaries and structures in order to remain at maximum administrative efficiency. However, government has a monopoly in many areas and civil order doesn’t always respond positively to a government darwining itself. So we use technologies such as constitutionalism, representation and liberal democracy to provide fluency and stability.

The two fluid levels of government in Australia have been federal and local government. The federal government has over-taken many responsibilities of the states as well as establish itself as the dominant taxing entity. The federal government does nearly 80% of all taxation and the state governments tend to be reliant upon the federal government for 50% of their expenditures.

Local government has their structures dictated by State legislation or constitutions, however, they have scaled through amalgamations. Brisbane City Council is the example most people trot out though it was created in 1925 through collapsing twenty different councils into one. A more recent example is Penrith City Council which amalgamated five councils in 1949.

Fluidity in Australia has been one way – effectively a vector for centralisation.

Administrative organisation must be fluid in order to respond to external and internal pressures. For a nation-state these pressures are numerous. They can be diplomatic, political, economic, martial etc. These pressures aren’t static either. No-one would argue that Billy Hughes in 1919 faced the same pressures, internal and external, that John Howard does in 2006. Technology, society, economy, basically everything moves fast and government has to organise itself to take advantage of those changes lest it darwin itself.

The best recent example of a government darwining itself was the Soviet Union. They bet on the wrong horse big time. They chose an inefficient political organisation, an inefficient economic organisation and to top it off – they took an aggressive international stance.

These types of decisions are only possible with massive amounts of external inputs to prop up the inefficiencies. The Soviet Union ended up collapsing because it ran out of money to maintain its inefficient structures. Iran is currently taking an internationally aggressive stance but they can get away with it due to the demand for their high-priced oil. Same with an increasingly despotic Russia. Without its dominance of European gas supply, Russia would have to compete economically which would mean a different governmental organisation in order to maximise its economic efficiency.

There is a lesson here for Australia. We have already had the “Sheep’s back” economy where we got blas© about efficient economic organisation – preferring instead to live off over-priced agricultural commodities. Currently Australia is under-going a resources boom. China, India, Japan and South Korea have an insatiable desire for the dirt we dig up. This boom will likely continue as other nations ‘do a China’ – such as Indonesia.

This puts Australia in the same position as Saudi Arabia, Iran and Russia. We can get away with inefficient organisational structures simply because we subsidise those inefficiencies with disproportionate revenues from a single source. Despite the current fashion for a ‘three cheers’ history of Australia, we are not immune to bad decisions – especially not from government, who have made destructively bad choices in the past.

Globalisation is the current dominant pressure on government – both internally and externally. The sheer speed, scope, reach and democratised nature of modern communications is something new. The governments that adapt to maximise the advantage from globalisation will set their constituents up for continuing achievement.

Globalisation is normally described as having the properties:

  • economic interdependence
  • transnational communications
  • homogenisation of differences
  • collapse of chronological time and geographic space (ie world is getting smaller)
  • transnational social and political movements
  • local action for global causes
  • transfer of allegiance away from the state

We are already seeing that the main form of competition between nation-states is economic rather than military. This is not because of US military hegemony but due to the destructive economic nature of warfare. When India and Pakistan were on the brink of war several years ago Indian business leaders went to the Indian government and told them to stop it. The sabre rattling was costing them revenue. American companies that contracted services with them were getting nervous over the stability of India and were taking their business to more stable environs.

Another aspect is the transnational nature of positive and negative political movements. This appears to be the greatest pressure on internal government organisation. Especially heavily centralised ones – which Australia is.

The government supplies a lot of services to keep a modern society and economy humming. Roads, transport, energy, health, education, police, etc etc. Basically all the capital intensive stuff where the government has a constitutional monopoly or market solutions are less than optimal. With munitions being a commodity and the existence of cheap delivery systems, such as strapping a bomb to the chest of a terrorist, the authority of government to provide those services can be challenged easily.

Islamic groups find distinct advantage in an environment where the government has been delegitimised as their organisation is greater than religious unity. It also carries social and judicial services. Where a government leaves a vacuum of authority, well organised Islamic groups can quickly step in to provide security, services and judicial certainty. This is one of the problems the Lebanese government faces, Hezbollah is the second largest employer in the country.

A heavily centralised structure is easy to delegitimise as it carries singular points of weakness. Unfortunately when a government, or large powerful bureaucratic organisation, is faced with decentralised pressures its first instinct is to centralise more. Which is the wrong strategic response.

Australia has issues as it is already heavily centralised and any fluidity the system does contain flow toward centralisation. For instance the national government and High Court have aided the dominance of Canberra over the states while the states have denied Local Government the chance to write their own charters.

Centralisation does have advantages, it makes for unitary bureaucratic and regulatory regimes. It is also useful in a capital intensive environment – or when faced with a heavy centralised competitor. If we look at the current capital intensive services Australia government provides we can split them up by their national, state and local character:

  • National: Diplomatic, Judicial, Defence, Currency, Transport
  • State: Police, Judicial, Health, Education, Transport, Water, Sewerage
  • Local: Wheelie Bins, Transport, Libraries

By that measure we would expect the States to raise about 60% of all taxation revenues but they don’t. Rod Beckstrom described the technology of federalism as a “sweet spot” between centralisation and decentralisation. Bob Carr commented in July last year that Australia is now the most centralised of any federal system. The States are not above criticism, they have restricted local government, while dumping responsibilities on the federal government for political and fiscal reasons.

Yet there are few mechanisms for decentralisation. There has been a successful secessionist referendum in Western Australia, which ended up going nowhere, and an unsuccessful one in NSW to establish the State of New England. There are small secessionist movements around Australia such as in North Queensland. Most plans for the re-ordering of sub-national government and administrative boundaries involve the abolition of the States and the establishment of large regional bodies. A cursory glance at services provided by the levels of government suggests that the federal government should get slashed down to bare metal rather than the States.

Another means to provide local response and shared interest is by recognizing citizen organisations. Australia has a great history in this area with groups such as the Bush Fire Brigade, State Emergency Services and even militia. Those groups draw on the services and knowledge of the citizenry in times of emergency and crisis. Citizens become active, involved and capable of accurately judging and responding immediately to local issues. The government would provide subsidies to the capital intensive components such as training and equipment.

What would a decentralised Australian federal system look like?

It would have a minimal national government, limited to international issues rather the intra-state ones. The main advantage of the national government being that it enforces a mini free-trade zone between the states. The national government’s taxation abilities would be limited to financing itself.

The States would become the main form of government in Australia – faced with perpetual competition between each other politically and economically. Local Government would remain the authority on Wheelie Bins which is an under-rated responsibility. There would also be increasing autonomy and recognition of citizen organisations which would probably have to come from the national and state levels of government. These citizen organisations would go a long way to replacing many state based institutions.

Australia has no fluid vector for decentralisation. The methods to achieve decentralisation are generally catastrophic or disruptive which goes against a doctrine of fluent and stable government. This is a weakness in our system.

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Matt
14 years ago

Interesting article. I continue to be one of those rare breed of Liberals nowadays who is concerned about the trend towards too much centralisation. Having worked in finance for many years I am all too familiar with all the efficiency arguments but financial modelling only reflects the inputs that go in.

I’ve never met a bureaucrat in Canberra that understands the importance of a primary school to a community in rural Queensland for instance better than the locals or whether there is a bad stretch of road in SA which is costing lives every year. Greater centralisation also goes against the biggest trend we continue to see on the internet and in global society which is the formation of groups and communities around interests, be they local or global. The world is decentralizing and we are all focused on centralizing.

Kevin Rudd on this issue is sounding like the “have it both ways Kevin” we are beginning to become all too familiar with. He spends a lot of time talking about the importance of community on the one hand but on the other he wants to replace it with more “effective federalism” (i.e – Whitlamite centralization with Tony Blair spin). That sounds about as consistent as his article a few months ago talking about the values of Christian Socialism and then declaring himself not to be a socialist. Reminds me of John Kerry and the “flip-flopper” he was in 2004.

Government needs to become more effective at dealing with customers (voters) and putting them all in Canberra is going to make it worse not better.

Gadget
Gadget
14 years ago

The comment ‘The world is decentralizing and we are all focused on centralizing.’ is a half truth. The world is centralizing (called Globalisation), its just that some don’t see the need for a new world order. It is true however, that Australia is focusing, or being focused, on centralisation. It has been a pipe dream of Labor for over 120 years.

The states have been busy undermining the Federation since they all got incumbency. And there is no better expression of national hypocrisy than a bureaucrat giving a spiel about the choke-point that is federalism.

What we are seeing now is a move toward the Singaporisation of the nation, I reckon. Rudd and the dream team (along with its Leftoid intelligentsia) love America for its socio-political, capitalist culture; and they also love Singapore at the regional level with its total control mechanisms over the body politick.

All these catch-cries of ‘building’ ‘modernising’ and even adapting are all symptoms of a symbiotic regime attaching itself to Australia’s shoreline.

Consequently ‘These types of decisions are only possibl[e] with massive amounts of external inputs to prop up the inefficiencies. The Soviet Union ended up collapsing because it ran out of money to maintain its inefficient structures.’ And so it could end up being with Labors endless pseudo-despisement over the GST, which in fact it so secretly loves and adores. And which it intends to hijack.

And Matt, the bit about Christian Socialism was a repercussion over Labors previous 10-year mantra of the Liberals being Nazis. When the Leftoids found out that in fact Bonhoffer was warning about the dangers of National Socialism

ChrisPer
ChrisPer
14 years ago

In Perth, the old Perth City Council was broken into several new municipalities after a crisis in its administration.

The current Labor state government want to amalgamate the councils of the western suburbs into a super-council, allegedly on grounds of efficiency but most likely for efficient linking of State bureaucracies to council ones.

cam
cam
14 years ago

ChrisPer, In Perth, the old Perth City Council was broken into several new municipalities after a crisis in its administration.

Cool. I was wondering if city councils ever devolved into smaller units.

Patrick
Patrick
14 years ago

I agree at a broad level with the rationale for decentralisation. Partly because it is inefficient – politics is not finance, or not entirely.

But in practice, I have some trouble identifying particular foci for decentralisation. An interesting example is taxation, which you touch upon. Clearly it is desirable that the spender is actually responsible for raising/earning the money spent, no matter whether it is a government, a business or a person. It also seems preferable that taxes be levied at the smallest, hence ‘closest’, unit of government possible, for all the reasons Cam has (but particularly relevance, or responsiveness, and competition).

Unfortunately, so much is only weak support for decentralisation of taxation. It supports, strongly, shifting the responsibility for services to the municipal level, and hence the responsibility for the support of, whether by taxation or fees, those services. Although one does wonder whether this is only attractive because we already have the fundamental infrastructure to make it work.

The same argument is however support for the centralisation of business taxation – for what is the ‘closest’ unit of government to an Australian business? Or to a foreign business operating in Australia?

Also, can there really be sufficient advantages from state/municipal tax competition to outweigh the considerable disadvantage of different tax systems? Would Cam argue for constitutionally binding the different levels to an essentially compatible company tax system?

Finally, what about the ‘social’ services so dear to many of this site’s readers? Should they be municipal responsibilities? Would this lead to municipalities one after another ‘washing their hands’ of somebody else’s problem(s)? Would it prick the bleeding hearts of comfortable suburbia into actually paying for (not to mention coming up with) the solutions they want others to come up with, or would it merely shut them up?

Just to answer that last question, in fact, consider me a supporter. After all, the prospect of different municipalities competing to best reintegrate the marginalised is rather attractive – even if those reintegrated did immediately jump ship for a lower-taxing locale…

cam
cam
14 years ago

Patrick, The same argument is however support for the centralisation of business taxation – for what is the ‘closest’ unit of government to an Australian business? Or to a foreign business operating in Australia?

In the county I am currently in 80% of businesses have ten employees or less. Its budget is about 1B USD, so it is about 1.8 Brisbane City Councils in economic size. The county also has AOL and MCI in its boundaries. Apparently recently they did a survey and freaked out after discovering that the main economic activity in their county was small and medium business – not national or international ones. They changed a bunch of laws and fees to make it easier for business with small numbers of employees.

Also, can there really be sufficient advantages from state/municipal tax competition to outweigh the considerable disadvantage of different tax systems?

Software is making compliance easier and cheaper. I have been involved in systems that have had to take into account sales and payroll taxes. In the US the feds mainly tax on income, while the states do a mix of income and sales tax. The counties/cities/towns tend to do fees and property taxes. By far and away the most complex of those is sales taxes. We had one issue in Minnesota where one side of the river (Minneapolis) it was one thing, but on the other side of the river, the same service, was the opposite (St Paul). We solved it in software, but it was an exclusive case that had to be accounted for.

IMO sales tax [GST] is best done at the national level in a uniform manner. Income tax, fee-based, user-pays, property taxes etc are much simpler. So the states and local governments should get first dibs at them. I have seen issue after issue rise with fifty states and cities leveraging their own idea of a sales tax (is food exempt etc, same reason Hewson got himself in knots), but income tax and fee based have not been issues IME.

Would Cam argue for constitutionally binding the different levels to an essentially compatible company tax system?

The current Auian constitution limits the areas the federal government could tax in, though you wouldn’t know it from the practices out of Canberra. The states should be able to compete in economic policy. Queensland is a good example, the homogeneity that Canberra is forcing on the states is not a good thing IMO. I am comfortable with the states competing in tax policy with individuals and companies.

Patrick
Patrick
14 years ago

They changed a bunch of laws and fees to make it easier for business with small numbers of employees.
I think that is an excellent initiative – but I am not sure that it really strengthens the argument for localising taxation. But that is a good point, which AFAIK applies to Australia as well, about the predominance of SME businesses.

I certainly agree with you re sales tax. From my very limited experience companies do find it very complicated. I also agree re property taxes and local fees and services taxes (the last two being two means to the same end, usually).

I disagree re income taxes, partly because I think the difficulty is greater than merely the difficulty of devising software to pay it (eg income must first be accounted for, which for a small percentage of businesses to which I am over-exposed is often quite challenging when merely distinguishing between Australian and overseas, let alone when breaking it down state-by-state), and partly because I think there is a significant hazard in making the funding of many ‘social’ services dependent on localised taxation and provision, which would be necessary if income tax was to be localised since sales tax.

That said, I came down in favour of it because my intellectual curiosity outweighed my conservatism.

cam
cam
14 years ago

Patrick, I disagree re income taxes, partly because I think the difficulty is greater than merely the difficulty of devising software to pay it

Payroll services have become increasingly commoditised lately. The previous company I was with signed on to a payroll software service where the service managed the income tax rates and compliance from state to state.

I was surprised to hear a few months ago that Costco, Walmart’s main competitor, is offering payroll and pay cheque services. If the big-box stores are getting involved the margins must be tiny on payroll services.

Stewart Glass
14 years ago

Great article Cam.

I have always been a believer that keeping decisions at it’s lowest political level possible is best. (see 20 Keys #6)

For one thing it creates competition – if your council is getting bloated or inefficient you have the option to moving to a neighbouring council. The same goes with states and nations, though the higher you go up, the harder it is to move – thus less competition.

Seecondly it allows for diversity. Councils or states can more readily reflect the climate, landscape and type of people. Think Nimbin vs Sydney CBD.

Thirdly it allows greater chance for change from the population. A council is like a tinny, while a nation is like an ocean liner. The tinny is much more manueverable.

Fourthly – it keeps the consequences close to the decision makers. So if one region chooses a bung politician or scheme, another region on the otherside of the country doesn’t pay for it. The first region will learn not to make that choice again.

Although some areas (like defence) need to remain national, decentralization whenever possible is a grand idea.

Chris Lloyd
Chris Lloyd
14 years ago

So not only “google” but “darwin” has now become a verb! How will we explain to our grandchildren what we have done to the Queen’s tongue? You guys are really Jeffing the language here.

Stewart Glass
14 years ago

I quite enjoyed “darwin” as a verb! Speaking of which, the Queen’s tongue is not pure bred Corgi, but a real mongrel breed (german, latin, french, gaelic)

Speaking of language – is there another term for this political decentralisation? Localisation? Rhizome?

Any suggestions?

David
David
14 years ago

Rest of Australia can do whatever it wants. I would like to see Western Australia secede from the Federation and become a taxless, free, laissez-faire state where the role of government is constitutionally limited to the protection of its citizens’ individual rights only, which would be emulated from the American’s: Life, Liberty and the Pursuit of Happiness. WA’s Govt would not be in the business of providing health, education, transport, welfare etc. It would however have police, courts and an army (financed by voluntary means). Immigration to WA shall not be restricted (except for criminals and diseased).

cam
cam
14 years ago
sdfc
sdfc
14 years ago

“Publicly, Rudd can only either be a Christian or a Socialist, he cant weld the two”

Patrick
Patrick
14 years ago

And an early gong for wildly-overgeneralised and wholly incompatible with facts blog comment. Gadget may be overgeneralising slightly, but he is pretty close to the mark.

To take myself as an example, I actually know quite a number of Christians, and I am certain that none of them are socialists. Not one, of any denomination. A large number of them (but by no means all) do believe in some form of the welfare state, and in a duty towards one’s community, but they all believe in individual responsibility and freedom, as well. A far cry, it seems to me, from any usage of the word socialist in the last 50 years.

Gadget
Gadget
14 years ago

sdfc

I think you have mostly missed the point. Most of Labors Leftist support group, would be, at the very least, soft-atheist, or agnostic if we are lucky. For him to publicly join christianism and socialism at the pulpit, the lecturn or in the House, would mean political suicide. He would be un-secularising the Party; a Leftist no-no. Even their middle-age alchemy coudn’t join the two.

But dont worry, he coudnt fall on his sword, because it is made of Tin i say Tin.

Gadget
Gadget
14 years ago

“He who knows only his own side of the case, knows little of that. —