Essay

Negotiating the grey zone

Special interests, money and the democratic deficit

WHILE SUCCESSIVE AUSTRALIAN governments spent the past decade focused on their budget deficits, another deficit quietly opened: one of public trust in government itself. A wealth of evidence shows Australians have become increasingly disillusioned with their political class.

Growing suspicions that people in government serve themselves and their mates rather than the public interest are vented daily. They are also evident in surveys and voting behaviour: more than four-fifths of Australians think at least ‘some’ federal politicians are corrupt, and in the previous two federal elections, the vote for the major parties has been at its lowest level in more than seventy years.

With protest politics on the rise and trust in government in freefall, where does Australia go from here? First, we must grasp why trust matters and what Australians specifically are so concerned about. Then, we must bridge the growing gulf between citizen and state, starting with new rules of engagement in the ‘grey zone’: where economic power is converted into political influence.

The Australian Election Study shows the proportion of people who trust government ‘to do the right thing’ (at least ‘sometimes’) was just more than a quarter after the 2016 election – the lowest level on record since the question was first asked in the early 1990s. At the same time, the proportion of people ‘not satisfied with democracy’ hit 40 per cent, its highest level on record.

Almost three quarters of Australians are particularly suspicious that ‘people in government look after themselves’, and that ‘government is run for a few big interests’ (56 per cent) – and these perceptions have been rising since 2007.

A 2018 study led by Griffith University and Transparency International Australia found that 85 per cent of Australians think at least ‘some’ federal politicians are corrupt, while 56 per cent had ‘personally witnessed or suspected’ public officials of making decisions that favoured a business or individual who gave them political donations or support. More shockingly, perhaps, the number was higher among those who had worked in government (61 per cent), and higher again among those who had worked in federal government (67 per cent).

Trends in Australian voting behaviour also signal disillusion with the political establishment. Grattan Institute’s 2018 report A crisis of trust showed the share of votes for minor parties and independents has risen sharply since 2007. At the 2019 federal election, a third of first-preference Senate votes and a quarter of House of Representative votes went to parties other than the Liberal, Labor or National parties. The vote for anyone but them is ascendant.

Minor-party voters don’t look especially different to those who vote for the major parties in terms of their economic or social views. But they do have substantially lower average levels of trust in government. For many, the decision to vote for a minor party is as much a vote against the political mainstream as it is for a particular candidate.

 

TRUST MATTERS TO both the legitimacy of government and its ability to get things done. Loss of trust erodes the social contract between citizen and state – it can affect the willingness of citizens to accept and abide by the law, and in a low-trust environment, individuals and businesses are less willing to take risks, to innovate and to invest.

Falling trust is partly a result of the growing gulf between citizens’ expectations and what governments can actually deliver. Australian governments ceded key tools for influencing social and economic outcomes when they deregulated much of the economy in the 1980s and 1990s. The Australian Government floated the dollar, reduced trade barriers, privatised government-owned businesses (such as Qantas, Telstra and the Commonwealth Bank) and relaxed regulations in the banking, electricity, water and telecommunications industries – helping to unleash a period of rising productivity and living standards.

But the bargain wasn’t made transparent. Governments were happy to take credit for the resulting economic growth, but were less keen to admit they no longer held the economic reins in the way they once did. As Laura Tingle wrote in Great Expectations, her 2012 Quarterly Essay:

The terms of our political debate are still framed by the expectation that governments can control events, or at least protect the community from them. But because our leaders seem as powerless to control private sector institutions as we are, we are constantly reminded of their impotence – and we don’t like it.

In their essay ‘On a mission to save democracy’ for Inside Story, researchers from the Centre for Policy Development identified ‘a staggering and growing gap between what Australians want and what their government is delivering’.

Great expectations, dashed, can breed cynicism. Low trust makes it harder in turn for governments to act. Major policy change is always difficult because it invariably creates winners and losers. Voters are less likely to hand governments a mandate for change when they neither trust them to deliver nor to cushion the losers. Pitching a bold policy agenda to a cynical electorate may well have been Labor’s downfall at the 2019 federal election.

So is a vicious cycle of distrust and policy paralysis inevitable? And what can be done to stop the rot?

Some lessons can be drawn from the past. Politicians and political parties can look back at what was different two decades ago when political leadership, for example, was much more stable. And it seems the major parties have heard this message – both have changed their rules to make it harder to stage the type of leadership coups that have delivered a parade of prime ministers over the past decade.

But trust can’t be rebuilt by simply going back to how things used to be. We cannot undo market liberalisation, the 24-hour news cycle or the social media revolution, even if we wanted to. Which means that to build trust, we have to look forward and ask: what does good government look like? And how do we bring it into being in today’s more complex world?

 

THIRTY YEARS AGO, Queensland’s landmark Fitzgerald Inquiry – which ended the reign of Premier Joh Bjelke-Petersen and sent several senior politicians and senior police officers to jail – attempted to define the conditions for good government as:

more likely to result if opposition, criticism and rational debate are allowed to take place, appropriate checks and balances are placed on the use of power, and the administration is open to new ideas, opposing points of view and public scrutiny.

More recently, in their 2017 book The Captured Economy (OUP), US economists Brink Lindsey and Steven M Teles (one a Republican, the other a Democrat) jointly argue: ‘In the ideal democracy, the mechanisms of government are devised so that the clash of contending opinions and interests is converted into policies that serve the common good.’

But what of a world where there is no clash? When one side projects their arguments with a megaphone and other perspectives are mere whispers, policy-making processes can quickly become ‘captured’.

As our nation grows larger and more diverse, it becomes harder for politicians to listen to the full range of voices. At the same time, Australian politics has become more demanding and more isolating. As Guardian journalist Katharine Murphy reflected in a 2017 essay for Meanjin, ‘politics has become not only unsustainable as a vocation, but hostile territory for human beings.’ The typical career track for a politician secures party loyalty and prepares them for frontline politics, but it doesn’t necessarily equip our representatives with much perspective on – or time for – life outside of politics.

If there is a Canberra ‘bubble’, there are already many voices inside it, eager to push their own agenda. For busy politicians and advisers, it is easier to listen to those who organise themselves and come knocking. Good lobbyists know what’s on the agenda and provide the information policy-makers are looking for just when they need it.

But the job of government is to represent – to seek out a wide range of views and, with them in mind, adjudicate the public interest.

Those who come knocking are not representative. Those who make it easy on politicians do so because it is in their interests.

 

IN 2018, WE published a report called Who’s in the room? that crunched the numbers on political donations and lobbying activity to understand the links between money, access and influence in Australian politics. We found that the well-resourced and highly motivated achieve much greater access and influence than most Australians could ever expect.

Our research showed that well-resourced groups, particularly big business and unions, use money, resources and relationships to influence policy to serve their interests. Sometimes this is at the expense of the public interest, and even if it’s only sometimes, this is not the fair go – nor the democracy – Australians expect.

Our report identified vulnerabilities on several fronts.

Political parties rely on a handful of big donors: just 5 per cent of donors contribute more than half of all declared donations. These people have significant sway: taking their dollars elsewhere would have a big impact on a party’s capacity to fund the wall-to-wall ads we now see during election campaigns.

Money buys access. Time with politicians is explicitly ‘for sale’ at party fundraising dinners. Political donations can open doors, build relationships and foster a sense of reciprocity. And the fact that industries in the crosshairs of policy debate sometimes donate generously and then withdraw once the debate has moved on suggests they believe, perhaps rightly, that money matters to outcomes too.

Some groups lobby much harder than others. Our research shows that businesses with the most to win or lose from government decisions – in sectors such as mining, energy, property development and transport – get more meetings with senior ministers, make the most use of commercial lobbyists and donate much more to political parties than might be expected, given their relative economic contribution.

No one should be surprised these groups are knocking on politicians’ doors. But our analysis shows that consumer and community voices are often not in the room at all. This impoverishes debate, undermines the necessary democratic clash of ideas and can lead to policy that serves the few rather than the many.

Powerful groups have triumphed over the public interest in many debates, from poker-machine reforms to pharmaceutical prices, to toll roads and superannuation governance.

Political donations shift with policy debates. Donations to the Coalition from pro-gambling groups jumped from around $200,000 a year to almost $1 million in 2010–11 when the industry was campaigning against poker-machine regulations proposed by then Labor Prime Minister Julia Gillard in conjunction with Independent MP Andrew Wilkie. Labor ultimately backed down and, soon after, donations dropped back to their former levels. Pro-gambling groups have used similar tactics in state elections also.

Some special interests even have a seat at the table when it comes to policy design in their sector. For example, Medicines Australia – the peak body for the Australian pharmaceuticals industry – is active in lobbying, and has substantial influence over government pricing arrangements for medicines, including the technical details of how prices are determined. Other voices, particularly those representing consumers, have considerably less input. The effect of the pricing regime is that prices are higher than in comparable countries, and Australian taxpayers and consumers pay more than they should.

Government procurement decisions can also be lucrative targets for special-interest influence, so they are usually subject to strict rules. Yet there are still examples where those with relationships and disproportionate access appear to have extracted ‘special deals’. The unsolicited proposal by James Packer’s company Crown in 2012 for a new Sydney casino was accepted without a competitive tender process. It suggested its own tax rate, and achieved an exemption from smoke-free laws. Packer personally pitched the project to the then NSW Premier Barry O’Farrell – and just a week after the meeting (and two weeks before Crown formally lodged its proposal), a requirement for independent evaluation of unsolicited proposals was removed from the NSW Government guidelines for privately financed projects.

Such relationships are at least partly a question of resources: big businesses and unions have greater scope to make costly investments. Overseas trips, corporate boxes at the football and marquees at the Melbourne Cup don’t come cheap. But all regularly pop up on the interest disclosures of our politicians. Such events provide valuable opportunities to ‘bend the ear’ and build a relationship.

Increasingly, interest groups hire former politicians and advisers, benefiting from their knowledge, experience and – perhaps most valuably – their connections. For example, Adani’s lobbying of the Queensland Government has been led by former Queensland ALP Secretary Cameron Milner (also a former chief of staff to Bill Shorten). Between 2015 and 2017, Milner’s lobbying firm achieved more contacts with government officials on behalf of Adani than any other firm on behalf of any other client, including several meetings with the premier.

Lobbying firms that employ former government officials are more successful at getting meetings with government. And politically aligned lobbying firms ebb and flow with the political tide: commercial ascendancy depends on the currency of one’s contacts.

Julie Bishop and Christopher Pyne’s post-politics jobs with Palladium and EY respectively are only the most recent examples. Since 1990, around a quarter of former federal ministers or assistant ministers have taken up roles with special interests after political life. And former government officials make up a large and growing share of commercial lobbyists.

The ‘revolving door’ between politics and lobbying is a significant risk to good decision-making: policy-makers should be listening to those with the best ideas, not simply those with the right connections.

 

POLICY-MAKERS SEEKING to tackle undue influence face a difficult balancing act.

Advocacy is the lifeforce of democracy. Interests should be able to advocate for themselves, and they should be able to donate money to support causes they believe in. Lobbying helps to introduce new ideas into the pool of potential policies as well as reduce the likelihood of uninformed or damaging decisions by those in office.

But if some interests have more opportunity to influence than others – and can sway decisions in their favour – then we have a problem.

Welcome to the grey zone.

This is not a place of black-letter corruption, but neither is it squeaky clean. Within the grey zone lies what American academic Lawrence Lessig terms ‘institutional corruption’, where special interests can compromise institutions and ‘corrupt’ them away from their core purpose without any criminal corruption taking place. For example, when political parties and their elected representatives are dependent on a small group of major donors, they have a dual accountability – to their funders as well as to the general public. This ‘dual dependency’ is a corruption of the intended democracy.

Institutions are built on trust – and undue influence undermines that. Individual cases of special treatment or a political favour can be outrageous in themselves, but they also breed broader suspicion: how much more goes on that we don’t know about?

It may be tempting to close the doors between the institutions and their potential influencers. But this is not the answer. In fact, we need to open those doors wider.

Growing public cynicism about special-interest influence is partly born of secrecy. Politicians can show they take the public’s concerns seriously by opening the door to public scrutiny and more actively engaging with the public. This means publishing ministers’ diaries (as NSW, Queensland and the ACT already do), providing timely information on major political donors (following the lead of Queensland and South Australia) and identifying those who lobby regularly (as the UK, Canada and New Zealand do). Greater transparency creates more opportunity for the public, media and parliament to scrutinise the policy-making process, call out undue influence and give voice to overlooked views.

But even transparency itself is not an easy fix for declining trust. A culture of openness can strengthen trust, but this depends on what it reveals. Seeing how the sausages are made may well make them less appetising, but that transparency does provide signals to government about what the public wants and expects of them. Knowing the eyes of Australians are on them, perhaps they will turn out better sausages.

To help rebuild public trust, politicians should also accept greater accountability. It’s true that politicians are ultimately accountable to their electorates, but elections are a blunt mechanism for deterring poor conduct and restoring trust. Frustrated voters are turning away from the major parties, towards independents and minor parties who promise to ‘drain the swamp’.

In a 2018 poll of 2,000 Australians run by Griffith University and Transparency International Australia, voters nominated undue influence of government through lobbying and political donations as their primary concern when it came to corruption – ranking it above fraud, nepotism and dishonesty.

The public is clearly concerned about the standard of politicians’ ethical conduct (even if corrupt conduct is rare). All federal parliamentarians should be subject to a code of conduct that sets clear standards, particularly around acceptance of hospitality, gifts and secondary employment – only ministers are currently subject to such a code. All public servants and many state politicians are already subject to these kinds of basic standards, yet the major parties to date have resisted these reforms at the federal level, despite several attempts to introduce them by minor parties and independents.

Ethical behaviour can never be fully defined by rules, but such a code would help set a standard with which to assess elected officials.

Beyond the rules, Australia needs a suite of institutions to support integrity in government that will help weed out corruption. Some we already have, but there are gaps in their scope and powers. Others are long overdue.

A Commonwealth Integrity Commission is finally in the works, yet the Coalition’s proposed model won’t do the job the public wants and expects. The proposed model is narrow in scope – tackling criminal matters but ignoring the vital issues at play in the grey zone. It also lacks the powers required to be an effective public-facing institution. It should be empowered to investigate systemic corruption risks, accept tips from the public (including whistleblowers) and publish its findings.

Even a strong and well-resourced integrity commission will need to be supported by other institutional arrangements. A parliamentary ethics adviser should be appointed to provide advice on conduct to current and former parliamentarians. An independent body should administer codes of conduct – and refer serious misconduct to the Integrity Commission for investigation.

Federal ministerial standards state that ministers should act with integrity, fairness, responsibility, accountability and (always) in the public interest. Yet when apparent favours for friends, misuse of entitlements, acceptance of expensive gifts and cashed-up post-politics advisory jobs go unchecked – often without even an independent investigation – it demonstrates that accountability is lacking, and raises real concerns about integrity.

 

TRANSPARENCY AND ACCOUNTABILITY will help clean up the grey zone, but the best defence against policy capture is ultimately healthy public debate.

Australia needs a wider range of voices in our policy debates. Consumers, community groups and marginalised voices are consistently under-represented. Those who lack the resources or organisational capacity to band together can struggle to make themselves heard – even when they represent a large chunk of Australian society.

When a few stand to gain a lot, they tend to be individually more motivated to persuade decision-makers than ‘the many’ who each stand to lose a little, even if the collective losses are substantial. This is how consumers, taxpayers, small business and young people can lose out in policy debates. Special interests are particularly likely to win out in technical, niche or complex policy areas, such as superannuation or pharmaceuticals pricing, because it is more difficult for other groups, voters and the media to engage with those areas.

Policy-makers need to actively correct this. Citizen engagement is, after all, a core responsibility of politicians and public servants.

One way to get better, more inclusive policy debates is to embrace policy-review processes that actively seek to include and represent a range of voices. There are already institutions and processes that facilitate this, such as the Productivity Commission’s inquiry process, which includes public hearings to test the views of interested parties.

The parliamentary inquiry into Labor’s policy to remove refundable franking credits invited members of the public to attend the public hearings and make three-minute statements about how the policy would affect them. The inquiry travelled to nineteen locations, including regional and suburban areas, received over 1,700 submissions, and heard from hundreds of aggrieved self-funded retirees and a handful of people in favour of the change. Whatever the political motivation of the inquiry, it brought policy makers face-to-face with members of the public directly affected by their decisions.

Imagine if this consultation approach was rolled out for other major policy proposals. Would decision-making be different if politicians heard en masse the voices of the unemployed on the merits of raising the Newstart allowance, or from victims of domestic violence about the funding of support services?

 

DESPITE THE RISING sense of public disillusion, Australia’s democracy remains robust overall, and good policy-making often prevails. Our system has a number of safeguards that aim to promote policy in the public interest – including the parliament, public service, media and, of course, the process of elections themselves. But these safeguards are not perfect, and in some cases they are getting weaker. Australians are concerned about special-interest influence. Our politicians should be too – for the sake of both good policy and public trust.

The public are rightly cynical about the grey zone – about the role of political donations, lobbying and the potential for favours for friends. Scandals periodically bubble to the surface, often without investigation or resolution, leaving the public questioning just what is going on in Canberra. Countries such as Canada, the UK and New Zealand have stronger integrity regimes than ours, as do all Australian states and territories. Yet successive federal governments have dragged their heels.

The reforms proposed here would strengthen Australian democracy by enabling voters to better hold government to account; they could boost the public’s confidence that the system is working for them.

None of these changes are particularly costly, and all are popular – which surely makes this a political no-brainer. The fact that these checks and balances have still not been put in place speaks to that widening gulf between citizen and state that feeds the sense of diminishing trust.

The one bright spot in the trust data is that declining faith in government is yet to infect other public institutions. The World Values Survey shows most Australians maintain high trust in the courts, the armed forces and police. And while confidence in the public service is just below half, it has not been declining in the same way as it has for the political class.

While the crisis of trust is one the political class needs to recognise and own, it is also an opportunity. Improving trust in the system has big, long-term benefits. As US Republican Alan Simpson pointed out back in 2000: ‘If you have integrity, nothing else matters. And if you don’t have integrity, nothing else matters.’ What an opportunity for a political leader to make their mark.

 

 

 

References

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Fitzgerald, T. (1989). Commission of Inquiry into Possible Illegal Activities and Associated Police Misconduct. Report of a Commission of Inquiry Pursuant to Orders in Council (GE Fitzgerald QC, Chair). Brisbane. http://www.ccc.qld.gov.au/about-the-ccc/Our-History

Griffiths, K. and Wood, D. (2019). ‘Why the federal government’s new integrity commission isn’t up to the job’. The Conversation. https://theconversation.com/why-the-federal-governments-new-integrity-commission-isnt-up-to-the-job-110441

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Murphy, K. (2017). ‘The Political Life is no Life at All’. Meanjin, Winter 2017. https://meanjin.com.au/essays/political-life/

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Sheppard, J., McAllister, I. and Makkai, T. (2018). Australian Values Study: Australia’s voice in the World Values Survey. Social Research Centre, Australian National University. https://www.srcentre.com.au/ausvalues

Tingle, L. (2012). ‘Great Expectations: Government, entitlement and an angry nation’. Quarterly Essay 46. https://www.quarterlyessay.com.au/essay/2012/06/great-expectations

Transparency International Australia (2018). Rising Corruption Concern Drives Support For Federal Integrity Body: Global Corruption Barometer Survey Results. https://transparency.org.au/media-release-gcb-survey-2018/

Wood, D. (2019). ‘Self-interest didn’t swing the election results, but the scare campaign did’. The Guardian, 23 May. https://www.theguardian.com/commentisfree/2019/may/23/self-interest-didnt-swing-the-election-results-but-the-scare-campaign-did

Wood, D., Daley, J. and Chivers, C. (2018). A crisis of trust: The rise of protest politics in Australia. Report No. 2018-05. Grattan Institute. https://grattan.edu.au/report/a-crisis-of-trust/

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