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How to reform and be re-elected
By
PROFESSOR ALLAN FELS, AO
Dean
The Australia and New Zealand School of Government
Friday, 26th November 2010
Making Reform Happen
OECD, Paris
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INTRODUCTION
• How to reform? – lessons from Australia’s
successful microeconomic reform.
• How to be re-elected?
• How to sustain reform?
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MAJOR AUSTRALIAN REFORMS
SINCE 1980s
• Trade liberalisation
• Capital markets
• Infrastructure deregulation
• Competition policy
• Labour market reform (partial)
• Tax reform
• Macroeconomic policy
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UNFINISHED BUSINESS
• Not all sectors covered
• Untouched sectors include:
– education, health, public services, planning,
intellectual property, infrastructure, labour markets,
some small business areas, pharmacies
• Reform fatigue?
• Recent loss of political interest?
• China as source of productivity growth – and
complacency?
• Interest in “nation building” and infrastructure
projects rather than market reform
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LESSONS ON HOW TO REFORM
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•
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A crisis helped
A mandate
Clear, sound reform goals and strategy
A committed, educated, political
leadership
• Bi-partisan support
• Union, business support
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LESSONS ON HOW TO REFORM
• A clear narrative to the public
• Strong institutions and supportive
bureaucracy
• Good sequencing
• “big bang” or “gradual” reform?
• Adjustment assistance/compensation
• Major financial payments to state
government
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HOW TO BE RE-ELECTED?
• Elections are lost for many reasons.
• Little evidence of link between reforms and loss of
the elections.
• However, this is consistent with governments not
making reforms that harm them electorally.
• But governments often lose elections if they do not
reform – they are seen as “tired” and not generally
productive.
• Electors often prefer “conviction” politicians.
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HOW TO BE RE-ELECTED?
• Governments are in a strong position to educate the
public and publish information about the benefits of
change.
• Reform may initially get media support.
• Reform may create fresh interest groups and fresh
sources of constituency support.
• Reform may break up old opposition groups.
• Reform can bring significant public benefits.
• Once reform has occurred public attitudes may
change towards acceptance.
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HOW TO BE RE-ELECTED?
• Do not reform everything at once.
• Have a narrative.
• Use crises to justify policy changes.
• Attack the status quo.
• Cultivate interest group support.
• Nothing guarantees re-election!
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HOW TO SUSTAIN REFORMS
• Reform sustainability cannot be taken for
granted
• Politics does not cease once reform is
introduced
• Sustaining reform is not just an
administrative implementation problem
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SUSTAINING REFORM
• More emphasis is needed on what happens
politically after reform is proclaimed.
• This is not a reference to practical, administrative
implementation problems that arise after a reform is
proclaimed.
• Rather, the fact is that politics continues usually
unabated after a reform and that needs recognition.
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SUSTAINING REFORM
• The continuing process of politics after reform is
enacted may lead to:
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–
–
–
Sustained reform
Gradual erosion of reform
Reversal
Major change in the nature of reform
• After a reform there can be key political changes that
make or break the reform. They may include:
– Governance changes
– Old supporting institutions may be closed down and
new ones created
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SUSTAINABILITY OF REFORMS
• Reform may affect the nature of politics
– Identities, political opportunities and alignment
of relevant group actors
– Post reform investments may affect long term
political outcome
– Attitudes of people may change with
experience of the reforms – for better or for
worse
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SUSTAINING REFORM
• The reforms may have a major economic impact.
• They may even wipe out old opponents of change
(although they may also create new sources of
opposition).
• Interest groups may change radically after reform. They
may become more or less powerful. They may also have
to cope with the advent of new interest groups.
• Public attitudes may change in the light of experience of
the reforms.
• Market participants may invest in the new regime. This
makes it difficult to change the new regime once it is
established.
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SUSTAINABILITY OF REFORMS
• Sustainability of reform depends on political
reconfiguration after reform
– Interests opposed to reform must not have power to
reassert themselves
– Government and reform supporters have ongoing role
to ward off “reactionary” pressures
• To sustain reform:
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Strengthen governing capacity of reform side
Break up pre-existing structures if they resist reform
Create new constituencies
Create political cohesion
Alter pre-existing mindset