Valedictory Speech - The Past is a Foreign Country

Valedictory Speech - The Past is a Foreign Country

PM&C Who We Are The Secretary
Monday, 26 August 2019

Department of the Prime Minister and Cabinet

Image of the Secretary Dr. Martion Parkinson

Gandel Hall, National Gallery of Australia

Check against delivery

 

Thank you all for coming, and can I echo Frances’ excellent Acknowledgement of Country, and extend my own respect to the traditional owners of the land on which we meet, as well as to all Aboriginal and Torres Strait Islander people here with us today. Let me also acknowledge my Secretary Board colleagues here today, and others from across the public service.

I’m always surprised and, indeed, thankful when people turn up to hear me speak, particularly now at the end of my public service career. George Bush Senior once said the biggest difference he noticed about no longer being President was losing more golf games. After today, I guess the audiences for my speeches are going to be much smaller.

While my career has had its ups and downs, this is my first, and certainly last, valedictory speech. I was tempted to title this speech – “don’t do a valedictory the first time around”. In preparing this speech I thought a lot about the reason for delivering a valedictory and why you all might be here today. Some of you may have come along to hear me settle some scores, justify my failures or burnish my legacy. Well I’m not going to do that – at least, not intentionally.

The great comedian Steven Wright says “I like to reminisce with people I don’t even know”.  Well I don’t like to reminisce much, and certainly not with people outside a close and trusted circle, and not without a red wine or two. Except perhaps, today, where my personal experiences in some small way may be of interest to you in your future endeavours: endeavours vital to making this country an even better and safer place to live.

One of the most important things I’ve learnt in my role as Secretary of the Department of Prime Minister and Cabinet is how important history and culture is to an individual’s sense of wellbeing. Indigenous Australians feel it in their attachment to country. In large part, where you come from helps define what you value.

Well, I grew up as a working class kid in the days when that meant something different to what it does today. Today, many middle class people like to think of themselves as working class, similar to how tracing your convict ancestry enhances your social status. Back in the 1960s, though, if you were a working class lad your meals could be variable, relationships insecure and entertainments sparse – more akin to how many chronically disadvantaged people live today. I was born in Stawell and my early life was one of itinerancy, not of opportunity, but necessity.

My life was laid out – people like me shouldn’t aspire to a university education, and back then that meant being streamed into a technical school to learn a trade from year 7.

But when my parents moved to Adelaide in 1975 I ended up in year 11 at a high school for the first time. In one of those fortuitous disfavours, I was limited to studying economics, given I had none of the prerequisites for other subjects. If you have ever read Samuelson, Marx or Keynes’ General Theory, you would at least acknowledge they are challenging, even confounding in parts. To a young country kid they were indecipherable, except in one important way – reading them let me glimpse a much wider world than I had ever known. I could feel that these were ‘big ideas’, written and read by people having conversations I intuited were important, even though I didn’t understand what was being said – the equivalent of putting my nose up to the window in order to try and lip-read the conversations inside.

I was particularly interested in why people were poor, particularly how poverty was endemic through generations. Samuelson’s work suggests that if society values everyone equally, then we only need enough income inequality that encourages people to work and innovate. Inequality can only be justified by incentives that makes society better off over time. But did the chronically disadvantaged – and their children – really need that much encouragement?

My parents wanted better for their kids than they had it. My grandmother particularly guided me towards the education that she was denied due to a mix of her class, gender and income. It’s not hard to see where my work ethic, desire to prove myself, concern for the unheard, and priority on getting things done – sometimes to the neglect of due process – comes from.

But if I’ve achieved anything, I owe this success more to the fantastic mentors and colleagues who’ve helped guide and shape me as a leader – and none more so that the fabulous EAs who’ve been with me every step of the way, especially my colleague and good friend, Bev Sims.

As they say, the past is a foreign country. It was an Australia of accepted commercial sexism, smoking behind the sheds and casual racism. But it was also an Australia where a kid from a family without means could be the first in their extended family to finish high school. A country where what mattered for success is how good you are, not who you know. Where whatever your cultural background, if you could punt a footy forty metres you were alright. To me, this is the part of Australian culture that is most worth preserving.

Call it whatever you want; merit, opportunity, fairness - this country more than any other is built on giving everyone a ‘fair go’. It’s not only driven our success: a culture that rewards merit has driven human advancement wherever you find it – from progressing as a legionnaire through the Roman army, completing the test to become a Chinese mandarin, to debates during the Enlightenment. While we don’t yet know what caused the industrial revolution, a society that let metal worker James Watt tell his idea of how to make a steam engine, surely had a lot to do with it. More recently, you can trace it to the UK Northcote‑Trevelyan civil service reforms of 1854 that proposed a politically neutral service, replacing cronyism with the merit principle and a bureaucracy able to run the largest Empire the world has ever seen with the technology of sails and paper. These precedents have flowed through time to our own Australian Public Service and are the foundation of the current APS Review to which I am committed. But they are anchored the only way they can ever be – in the Australian culture.

What is unique about Australia is that you find the merit principle almost everywhere. This is one of the few countries in the world where passengers regularly sit next to Uber drivers, rather than be driven around in the back seat. It doesn’t matter if you have an AO after your name or not, the person able to tell the best story gets centre stage. The Nobel Prize winning economist, George Stigler, once said that competition is a tough weed not a delicate flower.[1] It has always stuck with me because that kind of describes what it’s like to grow up in Australia. We don’t like tall poppies, we value the hardy weeds. This is not something we imported from overseas, certainly not from the socially stratified UK. It has evolved uniquely, blossoming in these hard, dry soils.

It’s no coincidence that AFL is probably what economists call a ‘weak link’ sport.[2] Unlike sports, such as basketball, where if you have the best player you are more likely to win, weak link sports depend on how the team works together to support the less able. You can lose a Buddy Franklin and still win the game. It’s how you play together, not how many stars you have. This is the sport of a country kid wanting to fit in, a culture where you need to work together to survive, and a sport worthy of the name ‘Australian Rules’.

Like my team, the Essendon Football Club, I’ve taken a few knocks and had to rebuild. I received the ‘wooden spoon’ as head of the Treasury in 2013 – a job I enjoyed and in which I aspired to follow the nation-building work done by predecessors such as Chris Higgins, Ted Evans and Ken Henry.  It was a drawn out departure, and I couldn’t even look forward to sitting on the couch to watch a care free game on the weekend as the Essendon Bombers also had a terrible season, plagued by the supplements scandal.

Apart from my time as Treasury Secretary, my personal ‘highlights reel’ would include being the first Secretary of the Department of Climate Change in 2010 and becoming head of the Department of the Prime Minister and Cabinet in 2016.

Each of these jobs has taught me something.

The Treasury taught me just how hard it is to change an institution, even from the top. There are many more women in the Treasury who now see it as a viable career, after the introduction of the Progressing Women Initiative. I appointed the first female Deputy Secretary the Treasury ever had – in 2013, forty four years after ‘man’ landed on the moon and 112 years after Federation. I look forward to the day when we see our first female heads of Treasury, PM&C and of our national security and intelligence agencies.

Economic policy not built on individual wellbeing is simply bad economics which is why the Treasury Wellbeing Framework was such an important initiative. Not only that, the Wellbeing Framework helped Treasury engage with stakeholders who otherwise equate economics with hieroglyphics and Treasury officials as if they are aliens from another planet. 

I don’t think I really comprehended the challenges of leadership until faced with setting up the Department of Climate Change. Not only were there organisational challenges in setting up a department from scratch, but I was serving Ministers responsible for the most divisive issue in the country. Notwithstanding the obvious ability of the Ministers and their Opposition counterparts – especially Wong, Combet, Turnbull and Macfarlane – they could not stop the debate from bifurcating to the extremes. Many environmentalists couldn’t acknowledge that adaptation was needed, because they couldn’t let anyone think mitigation wouldn’t work. The deniers couldn’t admit the importance of adaptation without acknowledging any climate change was actually happening. So we ended up in a ‘conspiracy of silence’ that inhibited our nation from preparing for the inevitable change.

Division may be death in politics, but it’s also debilitating to society. We do have some deep chasms in Australia, and the public sector has an important role to play in helping to bridge them, particularly in marshalling the evidence base for what works, and what does not.

As Noel Pearson reminds us, our nation has been born out of an amalgam of 65,000 years of continuous habitation by our Indigenous peoples, British laws and institutions and the dynamism injected by our post-war settlement. When you think of it that way, it’s quite incredible that it works. We have much to be proud of – not in a jingoistic, nativist way – but we also have more to do.

Discrimination is not just inconsistent with my values, it runs contrary to my professional training. You have probably heard economics referred to derisively as the dismal science. Well it is, and I am proud of it. The phrase was coined by William Carlyle in 1849 when referring to economists who had the temerity to think of slaves as equal to everybody else. Economics is based on the idea that social value is built on the wellbeing of individuals, all of whom are of equal value. What a dismal science indeed!

Economists hate waste, but again if you really unpick that, it means making sure all your resources are fully employed – in short, we want to see people who want to work able to do so, to create opportunities for everyone to contribute to society in some way, and to lead lives they have reason to value, to use Amartya Sen’s memorable phrase. We don’t like unearned privilege because it creates barriers that exclude people from being the best they can be.

If values and philosophy don’t capture you, maybe numbers will. A rather ingenious recent paper[3] found that roughly 40 percent of US GDP growth per person between 1960 and 2010 can be explained by improved allocation of talent from removing discrimination. In 1960, 94 percent of doctors and lawyers in the US were white men, by 2010 the proportion was just 62 percent. Presuming the distribution of innate talent didn’t change through those years, a lot of productivity was wasted in 1960 from not letting the best succeed on merit.

Last year’s Productivity Commission report[4] taking stock of the evidence found income inequality in Australia had been relatively stable since the late 1980s. We have not experienced the rising income inequality at the top end seen in the United States and much of Western Europe – although wealth has become more unequally distributed off the back of rising house prices. While this stability should be applauded, that is a low bar. Our history has bequeathed a degree of entrenched disadvantage that should be seen as a disgrace in any country, but particularly one as developed as Australia. More than fifty percent of those in the bottom decile in 2000 were still in the bottom twenty percent fifteen years later. Ideally, people should only be at the bottom of the income distribution spectrum temporarily due to life events, not whole families and communities sentenced to it for generations. If you want a single thing to blame for the disadvantage we see in Australia, particularly in our remote areas, look no further than an understandable lack of hope. With those kind of odds, anything else would be irrational. Education is a key way for us to even-up those odds but to do that we need the best education system we can build and a culture that values learning.

Valuing diversity as something inherently Australian should increasingly be seen as a strength of this country and a comparative advantage in the region in which we live.

When I first came to Canberra in 1981 I didn’t have much idea about the wider world. Having spent all my life in school I assumed I would become an academic, with Treasury a stepping stone to ANU. Yet Treasury gave me opportunities to see the world – four years at the IMF and a PhD in Economics at Princeton. I was no longer at the window, but now contributing to the conversation inside.

An international perspective should be essential to doing your job right in many parts of government. If you don’t understand how little sway we have over international financial markets and after-tax returns to investment, you won’t understand the case for cutting taxes on foreign investment to boost jobs. If you don’t understand just how important international trade rules are to restraining managed trade arrangements between the major economic powers, you won’t worry so much when the future of the WTO is threatened. And if you don’t understand the interplay of the economic and the strategic, you’ll be destined to only ever see half the challenges and half the opportunities available to us.

I was lucky to have worked with world class political leadership, particularly the Hawke/Keating and Howard/Costello governments, that cut tariffs and opened up this country to the world in the 1980s, 1990s and early 2000s. They managed to turn around the incoherence and populism of protectionism so that today most Australians see the benefits of openness. This is not a theory but a lived experience of 28 years of continuous economic growth. It is also almost a uniquely Australian experience.

With technology and the rise of emerging countries the world is getting even closer. To some, it may seem as if it is closing in. We are also facing a much more contested region with heightened strategic competition between the US and China likely to be with us for decades. This will shape the environment in which governments, business and citizens operate in the years ahead, constraining some options while creating others.

Looking back it now feels that to do reforms in the 1980s and 1990s, all we needed was to open the economic textbook to the right page and leaven it with some political realism. The exceptional political leadership of Treasurers Keating and Costello made it look easy, in retrospect: Float the dollar, done. Cut tariffs and liberalise investment, ok. Fix the institutional underpinnings of monetary and fiscal policy, no worries. Deliver tax reform and balance the budget, not much of a problem.

Today there is no such consensus on what reform looks like. Some of the economics we now need is not even in the textbooks. How should we regulate the new platform technologies that provide free goods to consumers? What is critical infrastructure and what are the dual use technologies where we should be wary of foreign engagement? How do we deliver the social benefits from open data, while dealing with individuals wanting to protect their privacy? Future public servants will have a much more difficult time than I ever had in navigating these and other questions – and continuing to provide frank and fearless advice while doing so.

Some of this is due to the new opportunities that technology now provides to answer questions we had no hope of answering in the past. Today we have the very real prospect of linking data to help people suffering chronic disadvantage. We can potentially assess the programs that work in delivering real lifetime benefits, particularly those that require personalised or coordinated care across multiple services. The government sector can and should be operating more like the Apple store or other online service providers, rather than how it operates today.

There are huge opportunities from open data and the new economy. But you don’t survive a Victoria state school education in the 1970s, or become head of the public service, if all you see are upsides. In fact, I’m a hard-headed realist – and have been criticised by some for that. I have a rather dim view of how individuals and nations interact with each other absent sound institutions. By “sound” I mean institutions that get incentives right – both for members to participate faithfully, and for the institution itself to be run effectively.

It’s fair to say that right now many of our regional and global institutions are struggling. It’s hard for the IMF and World Bank to protect the global financial system and address poverty when their membership doesn’t come close to reflecting the GDP shares of emerging countries. It’s hard for the G20 and APEC to demonstrate consensus in facing the opportunities and challenges of globalisation when the two largest countries are locked in geo-strategic competition. It’s particularly hard for the WTO to enforce trade rules when the largest countries are openly flouting them. The United States largely built this order in its own image, under-writing it with security guarantees. We benefit immensely from this order and must help support it wherever we can. During my career, I’ve sent officials to many places in support of the rules-based order, including the IMF, the World Bank, the OECD, the Asian Development Bank, and the Solomon Islands as part of RAMSI, PNG as part of the Enhanced Cooperation Program, the Coalition Provisional Authority in Baghdad following the Iraq war, and on exchange with many other countries, especially in our region. 

Most of the cracks in the international rules-based order are due to the shift in economic weight from the trans-Atlantic to Asia. Some emerging countries are dissatisfied with the operation of the post-War rules and institutions they had little say in writing and that now fall short of serving their interests. The US is also increasingly dissatisfied, seeing its own progeny as insufficiently attentive to its interests. Some of the cracks are due to the downsides of economic interdependence, such as increased scope for economic coercion and undesirable technology transfer. We don’t yet know what any new international order will look like. But when it arrives, it will have to reflect the twin realities ‘on the ground’ of the changed economics in our region and continued US strategic pre-eminence.

What we cannot allow to happen here in Australia is the kind of retreat from openness and vilification of differences that we are seeing overseas. We will need to make use of every one of our advantages in coming decades if we want to sustain our prosperity and security. Our diverse multicultural society gives us unparalleled advantages in our region. Our merit based culture means we take the best ideas from anywhere in the world and apply them to stay close to the technological frontier. We allow markets to innovate and diminish privilege if a better service comes along. We make sure any kid, no matter where they come from, has the possibility of rising to the highest level of public service.   

I have directly served under 10 Prime Ministers and over a dozen Cabinet Ministers in my career. Every single one has had the best interests of the country at heart, although they have had different visions of what that means, and different means of achieving it. Most Australians don’t realise just how well served we are by our politicians, the high standards they uphold and how difficult politics really is. More recent PMs have been criticised in comparison to those of the past as achieving less or somehow having a lower stature, but I wonder whether legacies can only be assessed with the passage of time, and against the backdrop of the times. For one thing, many of their big strategic calls and judgments can only be assessed once the consequences have played out. For another, today we lack the perspective to see the full context in which they are operating, and that only history can provide.

There are really only two choices for this country: We can take pride in our diversity and use it as an advantage when interacting with the world, or we can hunker down behind borders and slowly gnaw at each other. Again, to their credit, our parliamentary leaders have maintained a remarkable commitment to an open economy and social cohesion, despite immense pressures the other way.

Kissinger once said that every road will get you nowhere if you don’t know where you are going. I finish my service having done my best to help our political leaders find the right road. And, after nearly four decades, and from the lofty peak of retirement, I will continue to watch you all do the same.

Good luck, and thank you.

 

[1] George Stigler (2007), ‘Monopoly’, in The Concise Encyclopedia of Economics, edited by David Henderson, Econlib. Available from: http://www.econlib.org/library/Enc/Monopoly.html

[2] David Sally and Chris Anderson (2013), The Numbers Game: Why Everything You Know about Football Is Wrong, Penguin.

[3] Chang-Tai Hsieh, Erik Hurst, Charles Jones, Peter Klenow (2019), The Allocation of Talent and US Economic Growth, BFI Working Paper 2019-93, University of Chicago, pp. 1, 31.

[4] Productivity Commission (2018), Rising inequality? A stocktake of the evidence, pp. 37–43, 96.