Infrastructure too important to be left to politics?

ABC’s Alan Kohler is touting an idea I floated a few months ago, namely beefing up Infrastructure Australia’s role in assessing federally funded infrastructure projects.  However Kohler advocates stripping politicians of the decision-making power and vesting it entirely in IA (cf Reserve Bank decisions on interest rates).

I strongly disagree.  We elect our politicians and expect them to make the big decisions and govern on our behalf.  There may be some particular decisions like official interest rate policy that are properly made solely on the basis of expert evaluation and that should therefore be left to the experts to make.  But most decisions involve consideration of a wide range of factors including inherently “political” factors about competing spending priorities; political in the sense that they involve subjective judgments about which of several possible decisions should be made.  Factors may be economic, social, cultural or whatever, but they’re not reducible to a formula capable of objective application by unelected experts.  They are, as the High Court says about discretionary decision-making in administrative law, “questions about which reasonable minds may differ”.  In those circumstances only democratic accountability to the people can provide workable safeguards.

That isn’t to deny that IA’s role needs beefing up.  It does.  But its role should be to ensure that government infrastructure spending decisions are properly scrutinised and transparent so that voters can evaluate these inherently political decisions.  We don’t need to vest the actual decision-making power in IA to achieve that, just give it stronger evaluative powers and make it genuinely independent of the government of the day.

Under the current legislation, the IA’s members (mostly Heads of Department) are appointed for relatively short terms and its working staff are public servants and therefore not formally independent of government in any sense. However, the real problem with IA is that its functions only include evaluating the business case for new infrastructure when commissioned to do so by the Minister (see s5(2) and 5(4) of the Infrastructure Australia Act 2008). Naturally the Minister doesn’t do so unless it’s politically expedient.  This problem could be readily fixed.  Simply make all listed IA functions under s 5(2) exercisable if IA itself thinks fit, appoint IA members for longer terms like the RBA, require that only a minority of members can be departmental CEOs and require that at least IA’s senior management are IA employees not public servants.

IA’s transparency function should be boosted by requiring government to report to Parliament within 30 days giving full reasons whenever it makes a significant infrastructure spending decision to fund projects not contained in IA’s Infrastructure Priority Lists, and to report annually on a whole of government basis on the extent to which projects have been funded in accordance with Infrastructure Priority Lists.  That would enable voters to assess the extent to which their elected representatives were engaging in expedient pork-barrelling as opposed to responsible administration in the public interest.

 

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
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econoclast
econoclast
10 years ago

A court could equally find that interest rate policy involves “questions about which reasonable minds may differ”. But thankfully, the RBA has been made free of democratic accountability, and we are all wealthier for it. Your argument has a slight inconsistency in that you say a problem with the IA is that it can only evaluate projects that the Minister may have chosen on the basis that they are “politically expedient”. Yet, you don’t want the IA to be free of this type of influence? Another inconsistency exists in the statement “enable voters to assess the extent to which their elected representatives were engaging in expedient pork-barrelling”. This is a bit difficult to understand given the definition of pork-barrelling. The infrastructure funded from taxes is building block in the economy. Like stable monetary policy, it quite possibly is best left to experts.

Dave
Dave
10 years ago

Ken,

I’ve said this before: Kohler really doesn’t have a clue. Here is what he says about energy infrastructure.

investment in energy infrastructure has ground to a halt while politicians battle it out over carbon emissions. Prices are already soaring and we face power shortages within five years. Years of under-investment has resulted in a massive transmission deficit which is pushing up electricity prices,

Well, no Alan. Firstly, investment in transmission and distribution networks has proceeded apace, which itself is a major cause of increased electricity prices. Secondly, energy network infrastructure is governed very much in the way that Kohler proposes, with an expert body (the AER) deciding on investment need. Thirdly, investment in generation capacity is decided by market generators, independently of government (although not entirely where the generators remain publicly-owned). Fourthly, we only face power shortages if no new capacity is built in the next five years: highly unlikely.

In summary, one could argue that the electricity regime demonstrates how you can successfully separate infrastructure investment from government and politics. It is a shame that Kohler is so ignorant about electricity that he fails to see a form of his proposed solution staring him in the face.

Matt Cowgill
10 years ago

Ken,
Your arguments against vesting IA with RBA-style independence remind me of the debate about a Parliamentary Budget Office. I have concerns that such an office, at least in its ‘strong’ form, would be vested with responsibility for making decisions on matters that are inherently political. Nicholas Gruen disagrees. See here: http://mattcowgill.wordpress.com/2010/08/27/an-independent-budget-office/ and many posts on Troppo

Patrick
Patrick
10 years ago

Yes I am surprised that you managed to complete this post without referring to Nick!! He does love independent quasi-regulatory agencies.

Whilst I love the Australian phobia of debt and the standard of living that it affords us, I do think we should be borrowing to fund infrastructure. The bigger problem is the vertical fiscal issue as it is really the Cth which should borrow the money given its role in raising the revenue but it is the States which really should borrow the money given their (or what one would expect to be their) role in building roads and train lines and such.

Maybe an IA (as you suggest or similarly modified) could be made to complement subsidiarity by taking referrals from local and State governments as well as the Minister, which might be less upsetting to politicians than complete independence.

Ken Parish
Ken Parish
10 years ago

Matt

You’re right that I’m suggesting a body with RBA-like independence but not RBA-like powers. That is, it would provide reports and oversight on proposed infrastructure projects but, unlike the RBA itm would not make oeprative decisions.

AFAIK Nicholas was similarly suggesting that his fiscal probity office proposal would have similar independence and would issue reports detailing its assessment of responsible fiscal settings, but it would not make any operative decisions either (again unlike the RBA).

Both suggestions are a bit like Ross Garnaut’s proposal lst week for a carbon tax oversight body, which as I understand it would also simply issue reports and make recommendations not operative decisions.

I would have serious problems from a democratic perspecive with any of these bodies actually being vested with substantive decision-making power. But I have no problem at all with the reporting/evaluation/recommendation role. Anything that allows interested citizens to gain reasonably objective information about key issues, to allow them to discriminate intelligently between the contending partisan assertions of the politicans is a very good thing (especially given the Coalition’s current strategy of demonisng everything Labor proposes even if it’s in fact a policy they’ve previously proposed themselves or previously endorsed and would almost certainly adopt in government).

Mike Pepperday
Mike Pepperday
10 years ago

Econoclast, your “thankfully, the RBA has been made free of democratic accountability” jars with me.

The RBA, the Electoral Commission, the Ombudsman the Auditor General are, as Ken says, free of partisan bias. As I understand it, they report direct to the parliament and, providing the governing party does not control parliament (which, except in Queensland, is nowadays seldom the case) they bypass the patronage and pressures of executive government.

Thus, I would say they are actually more democratically accountable.

Ken, how does your desideratum of no operative decisions fit with those other bodies?

Mike Pepperday
Mike Pepperday
10 years ago

Oops – correct that to read “…except in Queensland and the NT…”

paul walter
paul walter
10 years ago

It doesn’t worry me especially who announces these plans, so long as the processes involved remain open, transparent and subject to scrutiny and alteration, where necessary. My beef is, that like so many things over the last decade, the trend has run counter to it.
No more “special projects” legislation, or commercial in confidence or lack of freedom of info, to enable suppression of information about projects that he public arte entitled to know about, for obvious reasons.

Ken Parish
Ken Parish
10 years ago

“Ken, how does your desideratum of no operative decisions fit with those other bodies?”

I haven’t suggested a simplistic principle whereby no substantive executive decision-making powers should ever be vested in an agency that is independent of control by the political executive. The issue is to what extent decisions involve questions of fine and subjective judgments, especially ones of a potentially “zero sum” nature, or at least where the decision-maker is deciding who will win and who will lose and to what extent, should be vested in bodies that are not directly answerable to the people. Where that is the case (i.e. they’re “political” decisions in that sense) the decision should generally be left under the control of the political executive because they are directly accountable to the people.

By contrast, where the nature of the decision is more determinate and where we want the decision-maker to take the decision in a consistent, objective way in accordance with its expertise and determinate criteria (e.g. the RBA’s prescribed inflation band criteria as objective of monetary policy), and not with a weather eye to the decision’s short-term populist consequences, then it should be vested in an independent decision-maker.

Hence the RBA is the appropriate body to make interest rate decisions, the ACCC to make decisions about enforcement of consumer and competition law, the DPP to make decisions about whether to prosecute an alleged offender (but with political executive powers to issue ex officio indictments, grant pardons etc in exceptional cases) etc.

The Electoral Commission is the appropriate body to make binding decisions about enforcement of electoral law for similar reasons. Obviously you can’t sensibly have partisan politicians making decisions about electoral matters involving other politicians, because there is an unavoidable perception that they may make them for reasons of personal/political advantage rather than for the reasons prescribed by the electoral law (i.e. in general terms ensuring that the candidate the majority of voters want gets elected). The US system shows the folly of having elected politicians presiding over such decisions viz Bush v Gore.

The situations of Auditor-General, Ombudsman and the actual or proposed bodies I have been discussing (IA, Nicholas’s Parliamentary Budget Office, Garnaut’s carbon tax oversight body etc) are bodies which (would) function in areas where it is appropriate that substantive decision-making power should continue to rest with the political executive for the reasons I outlined. However they (would) serve an oversight function to create or enhance transparency and therefore accountability of the political executive to the people. Their function is to shine light into dark places; provide expert evaluation of complex, contested questions; allow citizens more meaningfully to make sense of and evaluate the conflicting assertions of the opposing political parties. It’s a finer-grained, sophisticated 21st century version of the notion of checks and balances on which our entire system of liberal democratic constitutionalism is based.

We can’t have a fully functioning democracy where people make choices about who they want to govern them unless the people have available to them enough information to make those choices on a rational, informed basis. Of course, political science research and ordinary observation indicate that very few people actually make their decisions on such bases (they usually make them from heuristics, prejudice, habit etc) but that’s no reason to avoid constructing/improving the system so that objective, informed, expert assessments are readily available for those citizens who wish to make an informed choice. Moreover, the existence of such scrutiny may inhibit at least the extremes of political bullshit pronouncements, because the political risk of being discredited and looking stupid is increased.

Nicholas Gruen
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Nicholas Gruen(@nicholas-gruen)
10 years ago

For what it’s worth I agree with Ken’s post and think he’s struck the right balance.

I’m a bit disappointed with Matt’s response above. If you follow his link to his blog it takes you to a lengthy discussion in which I try to explain how greater independence is a servant of democracy – in the way that judicial independence is – rather than its enemy.

Matt concedes that I’ve given him lots to think about but you wouldn’t guess it from his comment above. Indeed, you can’t really see any impact of my points in his debate with me over at his blog. Just concessions that what I say is quite persuasive.

He repeats the assertion that a fiscal authority “would be vested with responsibility for making decisions on matters that are inherently political”. Well what was the point of the exchange with Matt on his blog if he makes the same point I challenged him on without any sign of engaging with all those things I gave him to think about?

As I say on his thread, there’s a real irony Matt’s squeamishness about enhancing democratic deliberation through institution building comes from someone who wants to strengthen the role of government. I mean take a look around. Look at how the very sensible extension of the role of government to (very successfully) minimise the impact of the GFC went down. It’s been a carnival of misinformation and nonsense from start to finish. And apparently people reading the Sydney Telegraph in Western Sydney, listening to Alan Jones on the radio are supposed to work out which party’s policies will deliver the best fiscal balance.

Ultimately a fiscal authority gives us the best chance of being able to lean against the gales blowing from the shock jocks and the sundry other hysterics of the media towards a fiscal policy (and this includes borrowing to invest in infrastructure) that is influenced by some rational and disinterested attempt to represent the public interest and the state of our professional knowledge about how to run an economy.

Mike Pepperday
Mike Pepperday
10 years ago

Thanks, Ken, for the generous reply. I have trouble thinking clearly over this.

When I said that I thought it more democratic for the RBA to answer to parliament than to the executive, I was wondering if Econoclast would come back and show me I was mistaken, how it may be considered more democratic if this agency answered to the executive. I tried to read Matt’s blog since it concerns where the line should be drawn and his criterion is democracy, however much of the discussion is too economic for me. That in a way is the point: I want to know how to draw the line irrespective of the type of agency. What is the principle? I have (idly) pondered those agencies RBA, AG, Elect. Comm. etc, for years, trying to discern what the principle would be that says this agency should answer to parliament and that one should be part of the executive. That was behind my question to you: would power to make decisions be a deciding factor?

The checks and balances you mention have, for a couple of centuries (since Montesquieu at least) basically consisted of the three-way separation of powers: parliament to make law, executive to govern according to the law and court to settle disputes. In recent years, though, a sort of fourth arm composed of these bodies has arisen. Where does it fit in? What is its task in general terms?

If there is no general, unifying concept for this fourth arm then each instance has to be decided sui generis. And like both Matt and Nick, I plump for democracy as the criterion. Why do Matt and Nick disagree? Because they don’t see eye to eye on what democracy is. Nick advocates institutions but I am sure he would agree they have to be shown to be democratic.

Tried and tested though the separation of powers is and though we know that free and fair elections are democracy’s sine qua non, democracy is not any institution or any particular action. Democracy is rule by the people. In a perfect democracy every person who is affected by a rule would have a precisely equal say in making that rule.

Very simple ideal. If a new institution increases the people’s influence over government decisions then that increases democracy – by definition.

It is not always simple to tell. Extremes are plain enough: an RBA, an AG, an EC answering to the executive can be manipulated to electoral advantage – which reduces the people’s influence compared with when they answer to parliament. I do not know what to suggest as an example of the opposite extreme (the army?) or precisely why it would be so.

At any rate, Nick, your “enhancing democratic deliberation through institution building” has to be shown to actually enhance democracy, i.e., enhance the influence of the people and reduce the power of the government.

An institution that informs has a prima facie democratic case for if the people are well-informed they have more influence than when they are kept in the dark. The point is not that they will make better decisions because they are informed but that THEY make them and are not tricked into them. Democracy is not a statement about the quality of decisions but a statement about who makes them – who rules.

I have another fundamental puzzle. Why do we have an independent electoral commission? We know the functional reasons but not the causal ones. We have an independent EC; the US has not – why? Now probably someone has looked into this and there will be an answer. Perhaps some Troppodillian will be able to give it to us in a couple of sentences, however, though we need to know it, it will be a history answer and doesn’t get at the heart of the matter. The real question is: In what circumstances does a country set up an independent EC? (or reserve bank, auditor, ombudsman, etc)

I think this question is the most important in politics. Reform of political institutions is devilish hard and the reason is mainly that there’s nothing in it for the reformer. Faulkner can say the party needs more democracy and (nearly) everyone agrees but nothing will be done. There’s probably massive agreement in the US that an independent EC would be a good thing. But nothing will be done. So what are the circumstances where reform – an increase in democracy – does occur?

Nicholas Gruen
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Nicholas Gruen(@nicholas-gruen)
10 years ago

After my last comments re Matt’s view, I came across Krugman’s most recent column.

Institution building gives us our best chance to rescue politics and the national interest from sectional interest. Nothing much else has done it.

Mike Pepperday
Mike Pepperday
10 years ago

Institutions are not just the best chance; they are essential. Both democracy and oligarchy are expressed through institutions. Krugman doesn’t mention institutions – he talks of policies – but we can infer that he would want institutions that give those at the bottom of the heap – the jobless and the indebted – more influence. Does your budget office do that?

Nicholas Gruen
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Nicholas Gruen(@nicholas-gruen)
10 years ago

One can infer what one likes about Krugman’s preference for policies, but his lack of interest in institutions makes a lot of his marvellous journalism and commentary, just that – words.

I’ve just been defending the institutions I’ve proposed as technocratic with a strong, clear line between technocratic tuning of aspects of our economy (as is the case with monetary policy) and matters that require political and ideological deliberation which should be determined democratically. If there was a will to help those at the bottom of the heap more, one might develop institutions to do so, but there’d have to be broad-based political will to do so and the institution one would build should not masquerade as a technocratic institution.

And those at the bottom of the heap do have the vote you know, I might even sympathise with them and be happy to vote for some policy to the end you seek, but there are more of them than me and this is a democracy! So if they get distracted by lies from those representing the wealthy – about wealth taxes, and CGTs and FBTs and GSTs and resource rent and carbon taxes and all the rest of it – then there’s not much I can do about it! If they prefer Alan Jones’ view of the world, that’s their right. It is, as they say, a free country.

Mike Pepperday
Mike Pepperday
10 years ago

“If there was a will to help those at the bottom of the heap more…”

Honestly! As far as I am concerned, the bottom of the heap can go to hell in a hand-basket. DON’T help “them.” They are not zoo animals. Don’t help anyone; let people have the power to help themselves.

Your last para shows the problem exactly. You are frightened of them. You think in terms of keeping them away: my tribe is on top and I endorse a system which excludes the influence of those who disagree with me. At least you are frank – on Matt’s blog you were claiming democracy.

“some policy to the end you seek” I cannot fathom that. Influence or power is not a policy. An institution which devolves power is also not a policy. I seek no end.

You claim “technocratic” but don’t want to expose your allegedly technocratic institutions to a broad range of influence. We’ll just keep it between us experts, eh? I expect the governments of Russia, China and Burma are of like mind.

You are concerned about the antics of the shock jocks. Where else will the people turn if they are excluded from power? How far are you going to drive it? How long can you keep the lid on it?

There is not a shred of evidence that broadening democracy does harm. All the evidence of the last two centuries is that the more democratic, the more stable and prosperous the polity.

You are concerned that if they get more influence you will lose influence. That is true: power is the perfect zero sum game. You justify this by asserting that you know better than they do how the place should be run. All the historic evidence says that isn’t true. And all the evidence says that the longer you exclude people from power, the bigger the explosion when it comes.

Richard Tsukamasa Green
Richard Tsukamasa Green(@richard-green)
10 years ago

Mike – On independent electoral commissions, perhaps the answer lies somewhere in the different ways the Australian Ballot was instituted, i.e the specific form of secret ballots that entailed official papers being printed rather than voters bringing their own. (see this account by Peter Brent (aka Mumble).

If ballots are being provided by the state, obviously some body must exist to do so. In Australia the introduction of the Australian ballot coincided with the first legislative assemblies in SA and Victoria. In America by contrast they were added to a process of popular elections that had been around for decades. I’d speculate that in Australia, where there was already a state apparatus but not yet an electoral apparatus, an bureaucratic body separate from an elected assembly that didn’t exist yet was the easiest way to get the ballots that were needed. After there was an assembly, inertia kept the commission there, and thus extended to the later commonwealth. In America by contrast the assembly was already there, as was an electoral apparatus, so there wasn’t any need to create a body to get ballots printed, the existing assembly could achieve it.

Nicholas Gruen
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Nicholas Gruen(@nicholas-gruen)
10 years ago

Mike,

Though you’ve quoted a couple of snippets from what I wrote and then interpreted them for us all, I can’t really recognise anything I’ve written or any of my sympathies in whatever it is you think you’re responding to.

You’ve written:

“You claim “technocratic” but don’t want to expose your allegedly technocratic institutions to a broad range of influence. We’ll just keep it between us experts, eh? I expect the governments of Russia, China and Burma are of like mind.

The independent authority I’ve proposed is a technocratic body. It’s there to try to optimise the fiscal stance in the national interest. I would also argue that the fiscal stance is not a very political thing – like interest rates, it’s not without some short term distributional consequences, but like monetary policy it’s most central function is a technocratic one of trying to optimise activity and the stability of activity.

You want a different body (or perhaps you want me to want a different body – it’s not clear), but if it’s the former good luck to you. As my comments suggested, I’m not against such a body, I might vote for it depending on what it is, but like I think there’s a role for a central bank – and if there is it’s central function is not protecting the weak in our society, so a body that tries to optimise the fiscal stance is not one that has much of a role protecting the weak except that of keeping our economy strong which provides its own protection of the weak.

If you do get around to trying to establish an institution to defend the weak, it will need majority support. In my thinking, this is a separate matter from the institution I’m arguing in favour of. Getting a majority to protect the weak is not an easy matter. This is because the weak often vote against their own interests. They’ve recently had a great opportunity to get hold of a great swathe of mineral rents. They decided against it – they were invited to feel sympathy for the mining industry for saving us from recession (which it didn’t). Perhaps this is what they were thinking as they were swayed by those ads – who knows?

Mike Pepperday
Mike Pepperday
10 years ago

Goodness gracious. Nick, let’s try and sort just one thing out. Some weird misunderstanding.

In your previous comment you talked about a will to help those at the bottom of the heap. I don’t know why you thought helping the weak had any relevance to the topic but from the context it looked as though you thought I had wanted such a thing. It’s no idea of mine.

I said as much: they can go to hell, don’t help them, don’t help anyone. I was incredulous when I saw in this latest comment you again talk about protecting the weak and again make it sound as if I want that. You devote two paragraphs to it. What’s going on?

The only thing I can think of is that you thought I was being sarcastic. I wasn’t. I am not (here) concerned to help the weak. Not a jot. As far as I know helping the weak has nothing to do with democracy or with the independence of government agencies.

I am quite curious: where did you get this notion? What did you read into previous comments that led to it?

Nicholas Gruen
Admin
Nicholas Gruen(@nicholas-gruen)
10 years ago

I presumed you were being sarcastic.

I don’t think it’s particularly surprising with broadsides like this in your comment.

Your last para shows the problem exactly. You are frightened of them. You think in terms of keeping them away: my tribe is on top and I endorse a system which excludes the influence of those who disagree with me. At least you are frank – on Matt’s blog you were claiming democracy.

Mike Pepperday
Mike Pepperday
10 years ago

Nick, my broadside was inappropriate. That whole comment was an expression of impatience and I apologise. I misread something.

Mike Pepperday
Mike Pepperday
10 years ago

“Independence from political direction and assured accessibility of the public to the agency’s reports are the critical factors.”

Quite. It is our premise, though, that reporting to parliament is more likely to provide this. We think the Electoral Commission, Reserve Bank, and so on are more independent because of this arrangement. For the reasons you give, this premise is perhaps not a huge or black and white difference but that’s the assumption.

It is quite a settled matter, world-wide, that states are run with executive, legislative and judiciary. But here we are setting up bodies independent of these three arms, bodies not included in the theorising about separation of powers. What is the general description of this fourth arm? Under what circumstances is it a good idea?

The standard political process is that we go to a general election and the majority party gets to run things, via the public service, for a few years and then at the next election we pass judgement on the job they did. In general, the last thing we would want is the governing party to wash its hands of executive duties, the whole idea being that we be able to hold it accountable. Yet there are these few select duties we don’t want the govt to do.

What sort of duties / agencies are they? What are the criteria for choosing them? It is not, of course, that we don’t want to hold the EC or RBA to account. But if these agencies do make a mess of it, we can’t blame the government. So for which sort of things are we prepared to forego our normal accountability mechanism?

One answer has to do with political election (which is, I suppose, itself an add-on to the doctrine of separation of powers). The general rule would be that if manipulation of an agency by the executive could improve the executive’s re-election chances, the agency should have independent status. For example, manipulation of the EC would lead to gerrymander; manipulation of the RBA could lead to interest rate distortion; manipulation of the ACCC could protect big political donors from justice; an ombudsman who was not independent would just be a farce. Therefore they should be independent.

That seems fairly plain. Is it possible to frame comparably plain criteria regarding substantive decision-making and/or technocratic subject matter?