I’ve decided to republish Mark Latham’s speech to Parliament on the eve of war in Iraq, on March 19, 2003. It scrubs up damn well on the eve of the first anniversary of the toppling of Saddam’s statue on April 10, 2003 (see Whose flag?). Pre war political speeches by the father of the US Senate Robert Byrd also stand the test of time – see A lonely voice in a US Senate silent on war and Today, I Weep for my Country…. And see his powerful post-war speech on 21 May, 2003, The Truth Will Emerge.

 

Contrast the blind certainty of John Howard, who, on March 9, 2003, in the countdown to war, was asked: How hard have you wrestled with it (going to war)?

Howard: You always anguish over something like this, but I have never thought of changing my position. Never.(From Howard: Never in doubt on Iraq)

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The march of folly

by Mark Latham

In her outstanding book The March of Folly the American historian, Barbara Tuchman, looks at the reasons why nations and governments often act in a manner contrary to their self-interest.

She writes that throughout human endeavour “government remains the paramount area of folly because it is there that men seek power over others – only to lose it over themselves”.

For Tuchman, persistence in error is the problem. When leaders abandon reason and rationality, when they fail to recognise mistakes, when they refuse to withdraw from bad policy – no matter the damage they are doing to themselves and their nations – this is the march of folly.

Vietnam was an example of this process. Fearful of McCarthyism and right-wing opinion at home, successive American leaders – from Eisenhower to Nixon – refused to be the first president to concede ground to communism.

This is why they fought an unwinnable war for so long. This is why they pushed their country deeper and deeper into the folly of a counter-productive foreign policy.

I believe that something similar is happening in the United States today. Post-September 11, the American people want revenge for the attack on their country and the Bush Administration is determined to give it to them.

It is determined to wage war on Iraq and Saddam Hussein. Even if this means damaging America’s long-term interests. Even if this means diverting resources from the real war against terror. Even if this means trashing the UN system. Even if this means dividing the Western world and gutting NATO. Even if this means generating a new wave of anti-American sentiment around the world.

After the attacks on the World Trade Centre and the Pentagon, people were worried about what Al-Qaeda might do next. Today they are worried about what President Bush might do next.

This is the march of folly and shamefully, the Australian Government is following the United States down this path. This is the worst piece of Australian foreign policy since Vietnam.

The Prime Minister has made a crude judgement post-September 11 that the world has just one super-power and, in the war against terror, Australia needs to get with the power, no matter the cost to our independence and international standing. He is not interested in arguments about the soundness of US policy or the need for global power-sharing and cooperation. The Howard Government is determined to follow the leader.

This approach is spelt out in the Government’s recent Strategic Review, a remarkably simplistic document that even goes as far as endorsing the Son of Star Wars: American missile defence. Incredibly, this is not to protect Australian cities and territory. Rather, it recognises that under this Government, wherever the US army goes across the globe, the ADF will automatically follow.

This is not a white paper but a tissue paper, to cover the Government’s radical shift in defence policy. The old DOA was Defence of Australia. The new DOA is Defence of America.

The Howard Government has turned Australia’s national security upside down. It has handed over our sovereignty to the United States and left our country exposed to the adventurism of the Bush Administration.

For some of the media-elites, to say these things is seen as anti-American. In my case, I greatly admire the achievements of the United States people. I’m not anti-American. I’m anti-Bush. I’m anti-the right-wing hawks of the Republican Party. I’m anti-war.

The United States is a great and powerful nation. But being powerful doesn’t always mean that nations and politicians get it right.

It is in Australia’s interests to question US foreign policy and the competence of world leaders. Australian lives are now on the line. Our troops in Iraq are effectively under the command of George W Bush. No nation should just sleepwalk into war.

An unnecessary war

When people ask: what is the alternative to war, I say that the answer is quite simple. The alternative to war is peaceful disarmament.

On 7 March the chief UN weapons inspector Hans Blix reported that substantial progress had been made and that Iraq could be disarmed peacefully within a matter of months.

He said: “We are not watching the breaking of toothpicks. Lethal weapons are being destroyed.” He refuted US intelligence claims about the use of mobile production units for biological weapons, stating that, “No evidence of proscribed activities has so far been found.”

There is a huge credibility gap in the argument for war. We now know – as incredible as it may seem – that large slabs of the British Government’s dossier on Iraq were plagiarised from university students.

In this country, a senior ONA officer, Andrew Wilkie, has blown the whistle on the true nature of Australian intelligence reports. In his assessment:

“Iraq does not pose a security threat to the US, the UK, Australia or any other country at this point in time. Their military is very small, their weapons of mass destruction program is fragmented and contained and there is no hard evidence of any active cooperation between Iraq and Al-Qaeda The bottom line is that this war against Iraq is totally unrelated to the war on terror.”

So why the mad rush to war? Why does Australia need to act outside the UN system when the independent report of the weapons inspectors has said that peaceful disarmament is possible?

Why does Australia need to launch an unprovoked attack on another nation – a nation that doesn’t threaten us? Why have we sent our best troops and equipment to the other side of the world when they should be here, guarding our country against real threats, against the real terrorists?

Why do we need to be part of a war that involves the slaughter of tens of thousands of civilians? Why are our military forces striking a country where half the population is under the age of 15? That’s 12 million boys and girls, their lives now at risk because of George Bush, Tony Blair and John Howard.

None of these things need to happen. Peaceful disarmament is possible. This war is simply unnecessary.

More problems than it solves

It will create more problems than it solves. It will cause enormous suffering and instability in the post-war reconstruction of Iraq. It will breed a new generation of terrorists and increase the likelihood of terrorist activity on Australian soil.

The war against terror must target terrorists, not the women and children of nation states. It must solve problems, like catching Bin Laden, wiping out Al-Qaeda and addressing the Palestinian question. It must attack the core reasons for terrorism, rather than being diverted into conflict in Iraq.

The Republican Right in the United States has tried to legitimise its policies by talking of the so-called Clash of Civilisations – the struggle between Western values and Islamic culture. I regard this theory as nonsense.

The real clash is within a civilisation – the civil war within Islam itself, the struggle between militant fundamentalists and moderate Muslims. We need to do everything we can to ensure that the moderates win.

We need to find a lasting peace in the Middle East, not start a new war in the region. We need to address the burning problem of Third World poverty, overcoming the injustices that fundamentalists thrive on. This is why the invasion of Iraq is such bad policy. It is contrary to each of these goals.

A dangerous doctrine

There is another reason for opposing this war: it is based on a dangerous doctrine.

Sixty years ago mankind developed the capacity to destroy itself, most notably through nuclear weapons of mass destruction. Since then the world has managed to survive, mainly through policies of deterrence and containment. In the post-war years, this was known as the Truman doctrine.

The United Nations has also played a role. It may not be perfect, but it is still the best system we have for fostering international goodwill and cooperation. To ignore and then belittle the will of the United Nations at this crucial time represents an appalling shift in Australian foreign policy.

Even worse, and without any real debate, the Howard Government has embraced the new Bush doctrine of pre-emption. This doctrine overturns 60 years of successful US foreign policy, 60 years of deterrence and containment. It gives the US a mandate to launch pre-emptive strikes on other nations – nations that it deems to be evil. Bush has abandoned President Clinton’s emphasis on multilateralism and gone down the dangerous path of unilateralism.

Make no mistake. A world based on threats of military action, a world based on pre-emptive strikes is a world about to do itself terrible harm.

The folly of this approach can be seen on the Korean peninsula. Two-and-a-half years ago at the Sydney Olympics, the North and South Korean teams marched together. This was seen as a wonderful sign for the future. It gave the world hope for political and economic cooperation, resolving an international trouble spot.

Eighteen months ago, the North Korean leadership was in China studying the benefits of economic openness and liberalisation. Again, it seemed that the North Korean problem would solve itself. Like other communist regimes, under the weight of economic failure, it was going to reform from within.

Then 14 months ago President Bush included North Korea in his Axis of Evil speech, threatening military pre-emption. Not surprisingly, North Korea is now racing to defend itself, weaponising its nuclear power. In response, Japan has said that it too needs nuclear weapons.

This is the problem with pre-emption. It creates an international environment based on suspicion and escalation. In our country, bizarrely enough, the Prime Minister has said that we need a nuclear missile shield to defend ourselves against North Korea.

This is the madness of escalation. And none of it has anything to do with the war against terror. Not the development of Japanese nuclear capacity. Not the creation of an Australian missile shield. Osama bin Laden must be laughing himself silly.

We cannot run the world according to threats and first-strike thinking. Not a world in which 26 nations have chemical weapons and 20 have biological weapons. Not a world in which India and Pakistan both have nuclear weapons. Not a world plagued by the non-stop violence of the Middle East.

History tells us that deterrence and containment are the only answers. Along with the age-old hope of cooperation between nations.

This is where I fundamentally disagree with Bush’s policy. In outlining his new doctrine in September last year, he said that, “In the new world we have entered, the only path to safety is the path of action.”

I believe in this new world, as well as the old, the only path to safety is international cooperation. Multilateralism, not unilateralism. Containment, not pre-emption. Peace, not an unnecessary war in Iraq.

International power-sharing

Along with most Australians, I do not want a world in which one country has all the power. I do not want a world based on Axis of Evil rhetoric and the constant threat of pre-emption.

There is a better way. It is called the United Nations. This means respecting the findings of Hans Blix. This means respecting international opinion – in this case, the position of France, Germany, Russia and China. It means sharing power across the globe, instead of allowing one nation to appoint itself as the global policeman.

There was a time, of course, when George W Bush seemed to believe in these ideals. During the 2000 Presidential campaign he said that he wanted the United States to take a lower profile in international affairs, to be “a more humble power”.

His radical shift in policy has, in fact, humiliated his nation. He has provoked anti-American sentiment internationally. He has divided the Western alliance and badly damaged NATO.

I ask this simple question: who was the last world leader to unite France, Germany, Russia and China? This is an unprecedented coalition. From the right-wing Gaullists in France, to the social democrats in Germany, to Putin’s Russia, to the Communist Party of China, international opinion has united against the United States.

Around the globe, people do not want a world in which one country has all the power. They want power-sharing and cooperation.

This should be the basis of Australia’s foreign policy. The Howard Government believes in a uni-polar world in which the primacy of the United States is beyond challenge. I believe in a multi-polar world, recognising not just American power but also, China as an emerging super-power, plus the supra-national power of the European Union.

Australia is one of the few countries in the world well-placed to have strong relations with all three. In the Labor Party, this is not just an opportunity for the future. It is part of our political legacy.

Just as Curtin established the US relationship, just as Calwell established the European migration program, just as Whitlam established relations with the People’s Republic of China, the next Labor Government will have to realign and rebalance Australia’s foreign policy. Nothing is more important than getting these relationships right.

The US relationship

The great irony of the Government’s strategy is that it actually weakens our relationship with the United States.

Like any alliance, ANZUS works best when it is based on an equal partnership, when both partners bring something to the table. Under the Howard Government, Australia brings nothing but subservience. This is hurting the strength and viability of the relationship.

In practice, we matter to the Americans when we matter in Asia. The alliance is strongest when Australian diplomacy is able to influence outcomes in our part of the world. This is when the United States has reason to rely on us, to treat Australia as an equal partner.

Under this Government, of course, our influence in Asia is minor. Our neighbours shake their heads in disbelief when they see Australia echoing the American line, when they see our Prime Minister calling himself a deputy sheriff.

These are Asian nations that fought long and hard against colonialism. They are proud nations with little respect for countries that act like client states. They have independent foreign policies of their own, and they expect the same from Australia.

Mr Howard thinks the ultimate guarantor of Australia’s security is the US alliance. That’s nonsense. The ultimate guarantor of Australia’s security is the soundness of our foreign policy and the strength of our armed forces.

We need an alliance with the United States. But we also live in a new world, with new threats and new doctrines. The Howard Government has not handled these challenges well.

The next Labor Government will need to repair the damage, to rebalance the relationship. I support the American alliance, but it must be an alliance between equals – a genuine partnership, rather than the deputy sheriff role we have today.

Conclusion

The key divide in Australian politics is now clear. The Liberals have become an American war party. Labor stands for global power-sharing and cooperation. We stand for national security based on collective security. We stand for an independent foreign policy.

The Liberals stand for war. They stand for unprovoked attacks on other countries, because the United States wants it that way. The Prime Minister is too weak to say No to George W Bush.

This is the march of folly. The folly of bad foreign policy. The folly of a government that refuses to concede its error of judgement. The folly of a government that is sending Australia into an unnecessary and unwanted war, with all the horror of military and civilian casualties.

This is a war that will create more problems than it solves. It will create a new generation of terrorists. It has already divided our nation and broken the Western alliance.

I urge the Government, even at this late hour, to change its mind. Listen to the words of Barbara Tuchman: “In the search for wiser government we should look for the test of character first. And the test should be moral courage”.

Surely there is someone in this Government who can pass the test of moral courage, who can stand up and oppose this war. If just eight Government members were willing to cross the floor, the will of this parliament, the will of our democracy would prevail. We could stop Australia’s involvement in this unjust and unnecessary war.

Six months ago in this place, 24 Government members voted against stem cell research because of what they considered to be the sanctity of life, the sanctity of embryonic stem cells.

Today we are not talking about single cells. We are talking about real human lives. We are talking about the lives of 12 million Iraqi children, little boys and girls and their families.

Where are these 24 MPs today? They’re no longer defending the sanctity of life. They’ve joined the American war party.

I oppose the Government’s motion. I oppose the war in Iraq and I urge members opposite – those who can find the moral courage, those who truly believe in the sanctity of life – to do the same.

This is the text of Mark Latham’s speech on Labor foreign policy to the Lowy Institute in Sydney today.

 

Labor and the world

Australians are entitled to know how a party seeking to govern this country will protect Australia�s security and advance the country�s interests. This is the central responsibility of any Australian Government. It is the foundation of our capacity to create the sort of society we want.

Today, I want to describe to you the way in which the Labor Party looks at the world, at the fundamentals of our approach. In some areas of international policy we agree with the Government. In others we strongly disagree. These differences revolve less around any dispute about what is happening in the world than about what Australia can, and should, do about it.

The world which the next Labor Government will confront is very different from the world the last Labor Government faced. The Cold War which shaped so much of the history of the second half of the 20th Century � and of the Labor Party itself � is over. The West won the conflict, something for which we should always be grateful. In the end, effective statecraft and a large element of luck freed us from the awful pressure of a world dependent on a balance of terror, in which a slight miscalculation could have destroyed human life itself.

We have entered this new century with a single strategic and political superpower, the United States. Now alone among the nation states, it has the capacity to project and deploy military power anywhere in the world. It has assumed the ultimate responsibility: global leadership for the purpose of global cooperation and security. We all have a huge interest in this responsibility being met.

Meanwhile, another equally important force is transforming the world. Economic globalisation – open trade and financial flows made possible by the great technological revolution in communications. Globalisation is making the world more interdependent. It is blurring the traditional distinctions between domestic and foreign policy. By bringing into the world economy vast new areas of humanity, globalisation is generating new and important opportunities for Australia and many parts of the developing world.

So now, with the Cold War over and globalisation advancing, we have a global strategic environment dominated by one powerful country while, on the economic front, we have a quite different sort of world � an increasingly interdependent and multipolar one. This has created two power gaps globally. The first: the gap between the world�s sole superpower and the group of prosperous economic states that rely heavily on the effective stewardship of American economic and foreign policy.

The second gap is a prosperity gap: the growing inequality between developed and developing nations. This is where we need to see globalisation as an opportunity, rather than a threat. Opening up the world�s trading and investment channels so that all continents and all citizens may benefit from the power of economic integration.

As a developed economy and medium sized power, Australia has a role to play in bridging these two gaps. We should always be proactive, always ambitious for what Australian foreign policy can achieve. Through the anticipation of change and the skilful shaping of it, we can step up through the weight divisions of international diplomacy. This has always been the Labor way: ambitious for Australia and our contribution to the world.

In my speech to the Labor Party conference earlier this year, I said that Labor�s foreign policy is based on three pillars � support for the United Nations and multilateral institutions, our alliance with the United States and our engagement with Asia. Let me begin with relations with our major ally.

The American Alliance

The alliance relationship between Australia and the United States was first forged under John Curtin and Labor. It continued to grow and expand under later Labor Governments � and under US Administrations as politically different as those of Ronald Reagan and Bill Clinton. Labor believes in the value of the alliance not only to Australia and to the United States, but to the international community as a whole. We believe, however, that Australia has a role to play that is more than simply one of nodding agreement. We see ourselves as an equal partner.

This is how we successfully managed the relationship in the past and how we should manage it in future. The United States is a great and robust democracy. The country was founded on the revolutionary conviction that its strength depends upon the free expression of contending ideas. At any time, a wide variety of views are expressed within its political debate. Often sharper views than those which are the currency of Australian politics.

We understand this in Australia. The alliance is weakened unless each side expresses its convictions clearly and contributes ideas and energy to the common cause. Vitality in the relationship is, in fact, the lifeblood of it. This is a point of departure in Australian foreign policy.

The conservatives have always positioned the American Alliance as some sort of insurance policy, the premium for which is paid through Australian military commitments. This is how Australia got into Vietnam and now, the same in Iraq. Following the United States to buy insurance, rather than for reasons of policy. In Vietnam, against the �downward thrust� of Asian communism. In Iraq, as a Deputy Sheriff.

Labor has a different view of the Australian-American Alliance. We believe in Australia�s strength and sovereignty, building up our self-reliance within the terms of the Alliance. This means directing our military capabilities primarily to the Defence of Australia, its territories and national interests, rather than to expeditionary forces overseas. It means running a sovereign foreign policy � always, Australia first.

And in the war against terror, it means strengthening the homefront: a Department of Homeland Security, an Australian Coastguard, improved port and airport security and upgrading domestic intelligence. Every dollar Australia spends on adventurism overseas, such as the conflict in Iraq, is a dollar that cannot be committed to the Australian homefront.

Labor believes in an equal partnership with the United States. As a smaller and less powerful nation, we need to bring other qualities to the table, uniquely Australian qualities that strengthen our side of the relationship. There are three elements to this approach:

1. The importance of the intelligence relationship, based on the joint management and control of facilities in Australia.

In the war against terror, the intelligence relationship has become the most important aspect of the Alliance. During the Cold War, the challenge was to deal with the Soviet Union. The task now is more complex: to identify and deal with a wide range of individuals and other targets of interest. This can not be achieved on a global scale without a strategic Australian contribution.

2. Australia�s unique role in Asia – a Western nation inside Asia, with the potential to open up new markets and build regional cooperation.

This can be a real asset for the United States, as it was in the relationship between the Keating and Clinton Administrations in the 1990s. The United States assigns a higher value to an alliance partner that is competent rather than compliant.

3. The strength of Australian personnel and policy.

This was a feature of the Hawke and Keating years � the respect for Australia that our Prime Ministers, Foreign Ministers and Defence Ministers generated in Washington. Not as Deputy Sheriffs, not as insurance holders, but as equals, as genuine partners at the negotiating table. This is what I expect from the next Labor Government � Australian self-reliance and self-respect within the terms of the American Alliance.

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Asian Engagement

The next pillar of Labor�s foreign policy is our relationship with the region: with Asia and the countries of the South Pacific. At the core of this policy is a core Labor idea, developed during our last term in government: Australia must find its security in Asia and not from Asia.

This means a strong and active engagement with the countries of the region. Not window dressing or rote recitals of intentions, but wholehearted engagement. It means the policy cannot simply be about looking wistfully to a strategic guarantor, no matter how close or sympathetic that supposed guarantor may be.

Australia followed that policy between the two World Wars and we nearly paid the ultimate price for it in 1942. History demands that we learn the lesson. We cannot procure our security from Asia and we should not try. Our continent is not some kind of moveable raft which we can shift at our strategic pleasure. We need to grow our relationship with the region and the United States concurrently.

There is no doubt that since 1996, when Labor was last in office, the landscape has changed. The 1997 financial crisis was a major shake-out of the global economy and a severe blow to many Asian countries. It particularly hit the countries closest to Australia in Southeast Asia, Indonesia hardest of all.

But the economic reconstructions brought with them political change. The region is now more democratic than ever and better for it. We are dealing now, not with highly centralised and highly personalised governments of the kind our predecessors were obliged to deal, but with more independent parliaments and a freer media. Indeed, a more decentralised politics. This requires us to make a much broader and more sustained effort to project our interests and to engage more thoroughly with the people of the region. And I say, the people, not just their governments.

The language governments use and the way they see themselves in this matters. The alliance with the United States is not an impediment to our relationship with Asia. It never was under Hawke or Keating. What really matters is whether Australia is seen as an independent, creative member of the regional community or as a branch office of some old world club. If we lecture or hector or thump our chests, as the Howard Government has done, we will get the obvious response. And so far, we have. By contrast, during the period of the last Labor Government, we were able to advance on both fronts � with Washington and with the region.

Asia will become more and not less important to Australia. China, the world�s most populous economy, is continuing its strong growth and reform program. India is in the middle of one of the most exciting periods of its long history as it works towards economic openness. This is why Australia should see itself as an Indian Ocean nation as well as a Pacific nation. There are also encouraging signs of change in Japan�s economic and political outlook after more than a decade of stagnation.

Australia already exports five times as much to Asia as it does to the United States. And these new developments open up new opportunities for our country. This is the region where our natural trade advantages lie � not just in raw materials and agriculture but in services like education and health. It is where most of our bread will be buttered.

For this reason, many of us are worried that Australia is being marginalised at the wrong time, during this new and exciting period of growth. The issues in Asia, of course, are not just economic. Serious security problems remain in the Taiwan Straits and in North Korea. And transnational challenges, like the handling of environmental degradation and the spread of diseases like SARS and Avian flu are pressing.

The development of new forms of Asian regionalism, from which Australia is excluded, is a matter of concern to Labor. ASEAN Plus Three and the China ASEAN free trade area are two key organisations from which Australia has been locked out. If not for Labor�s APEC initiative and ASEAN Regional Forum, Australia today would be excluded from all Asian forums.

The next Labor Government will push back into Asia and the compelling benefits of multilateralism. In particular, this approach will define our trade policy. If the world�s economies go down the Howard Government�s preferred path of bilateralism, it will produce a spaghetti bowl of confusing and often conflicting trade agreements.

This is why Labor believes in multilateralism, most of all through the WTO and in Asia. This is where the big economic gains lie for us. This is where the weight of Labor�s trade policy will always rest. Asian engagement: it�s our great and enduring ambition for the Australian economy.

We are also ambitious for Australia�s role in our immediate neighbourhood. Even the Howard Government would now admit that it took its eye off the Pacific Islands, post-1996. This meant that instead of anticipating problems and dealing with them at source, they were allowed to fester � ultimately requiring rescue packages in the Solomons and PNG.

A Labor Government will restore the pre-1996 responsibilities of an Assistant Minister for the Pacific Islands (in this case, assisting Kevin Rudd). We will also work closely with New Zealand and the international financial institutions to give sharper and more effective leadership to our Pacific neighbours.

Australian foreign policy needs to be relevant to our time and place in the world. And if we are not relevant to the Pacific Islands, we are missing the most obvious of opportunities for Australian diplomacy.

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A Multilateral World

The third pillar of Labor�s policy is the world�s multilateral institutions. One of the important policy differences between Labor and the Coalition is that we have a much stronger sense of community. I have always thought Mr Howard and the Coalition took a cue from Margaret Thatcher�s remark that there is no such thing as society. That is, there is no such thing as a global community.

The Coalition emphasises bilateralism. We think that effective multilateralism is the key to maintaining global peace and prosperity. And to addressing issues like the proliferation of weapons of mass destruction, poverty and global warming. These institutions are not an end in themselves � but they are a means to an end. And that is an inclusive international community which, by effectively managing the interests of a complex world, finds ways of resolving problems, without resorting to force.

Labor shares some of the contemporary frustration with multilateral institutions. There is no doubt that the global machinery is yet to reach its full potential. Almost every one of the major multilateral institutions needs structural reform if they are to adequately represent the realities of the new post-Cold War world. This includes the United Nations and its Security Council and economic organisations like the IMF, the World Bank and the G8.

As a party, we have a long history of support for reform of the United Nations and other organisations. We have always made a positive contribution. But we disagree fundamentally with the Howard Government�s response which has been to pack its bags and go home when confronted with decisions it does not like. Worse than that, its downgrading of these organisations. Its veiled contempt. Not only does this do Australia no good, it does the world no good.

Labor believes that the true course for world progress lies in it being run cooperatively. Not confrontationally. And more representatively; giving the emerging states a real say in things. And regions too. Letting them be heard and be seen to be heard. For instance, it is incongruous that the G8 includes countries the size of Italy and Canada but not China or India.

The Cold War is over and has been won, yet the world is still organised on the template of 1947. Half a century has gone by, yet little in the power sharing or strategic structure has changed. Japan, the second largest economy and Germany, the largest West European economy, are not even permanent members of the UN Security Council. Is it any wonder the UN has become less effective, given it is less representative than it should be.

These are vital issues for an Australian Government with a mind for internationalism and multilateralism. These are areas where our capacity to thoughtfully and usefully engage with the United States matters. Fawning compliance never amounted to a policy. I believe the American polity would welcome our active and constructive engagement. I say this because, in the past, it always has.

There has rarely been a more important time for liberal internationalism. The end of the Cold War, the spread of wealth and the information revolution have changed the nature of the threats our predecessors faced. We are unlikely in the foreseeable future to confront a direct military challenge to Australia, but issues such as weapons proliferation, people smuggling and, above all, terrorism present new and exacting challenges.

On terrorism, we know the struggle will be long and sustained. The dangers terrorism presents have to be addressed on many fronts. We have to deliver comprehensive policing, effective monitoring of entry points, seamless coordination among Federal Government agencies and between Canberra and the States and Territories. And we won�t succeed without cooperation with our closest neighbours, particularly Indonesia.

Above all, we need good intelligence and objective intelligence. And a Government which does not try to draw on it selectively for political purposes. Or one which pressures advisers into only giving the advice that the Government wants to hear.

***

Conflict in Iraq

One of Labor�s first tasks will be to extract Australia from the Howard Government�s failed policies in Iraq. This has been one of the great debacles of Australian foreign policy � a war conducted for a purpose that was not true, a war conducted under the banner of the Doctrine of Pre-emption. This was supposed to be the great conservative contribution to the struggle against terrorism � a new way of thinking about and running the world. In practice, the Doctrine came and went with the blink of an eye.

Most Australians now acknowledge that the Howard Government�s policy in Iraq has been a contributing factor to the terrorist threat in this country. The Government�s recent abuse of Australia�s intelligence agencies has also increased the level of risk for Australians in Iraq, both military and civilian. So, too, the conflict in Iraq has diverted resources from the real war against terror. If all the time, effort and money used to invade and occupy Iraq had been used to target the terrorists themselves � to hunt down bin Laden, to break up Al Qaeda, to smash the networks of terrorist activity in South-East Asia � then the world today would be a safer place.

The Doctrine of Pre-emption failed in Iraq because there was nothing to pre-empt. No Weapons of Mass Destruction were used during the conflict and none have been found since. We now know that Western intelligence in Iraq was quite limited. In reality, the scientists who were supposed to be developing WMD spent the money elsewhere. As ever, in a Third World nation, chaos and corruption prevailed. There was nothing to pre-empt.

The Howard Government sent young Australians to war based on a hunch. Having got it wrong, the thing that I find most disturbing is their lack of remorse. Or sense of apology.

As with other international engagements such as Afghanistan and Somalia, Australia needs an exit strategy from Iraq. The most appropriate starting point is the transition to a new sovereign Iraqi Government in mid-2004. On this basis, Labor has declared its intention of having the Australian troops home by Christmas. Having strongly opposed the war and been proven correct, we see no need for an indefinite deployment, especially when Australia has so many other commitments closer to home. The thing about Iraq is that we had no business being there.

***

Conclusion

If I had to identify the key difference between Labor and the Coalition, it lies in the size of our ambition for Australia and in our confidence in this country�s capacity to shape events ourselves. Labor has never seen Australia as a bit player. We have never seen our future as someone else�s deputy. I have a stronger conviction than Mr Howard that Australia can, on its own and by virtue of its own good work, make a real impact on the shape of our region and even the shape of the world.

World politics, like domestic politics, can change quickly. Unexpected events � whether welcome ones like the end of the Cold War or unwelcome ones like September 11 � constantly overturn conventional wisdom and require new policy responses. This is why a political party needs to bring to office a set of underlying principles which will guide its response to the unpredictable events which it will inevitably confront.

For Labor, these principles are:

� That protecting the country and its people is the core and central responsibility of government.

� That Australia has a significant role to play in the world. And that good policy and the anticipation of change can make a difference.

� While our national interests will always be global, our diplomatic resources are finite and we need to focus where our interests are deepest and the prospects for our influence greatest. This is undoubtedly in the region around us � Asia and the Pacific and Indian Oceans.

� The Alliance with the United States is a Labor legacy of which we are very proud. It has been strong in the past. And it will be strong in the future. It is always most productive when each partner is contributing ideas and sharing problems, when it takes the form of an equal partnership.

� And finally, active reform and engagement with the United Nations and other multilateral processes can help build a better and more prosperous world. As ever, cooperation and power sharing are the great hope of humankind.

These convictions will guide me as I talk about these great challenges with the Australian people over the coming months. And, if we are successful later this year, they will guide the policy of the next Australian Labor Government.

Mark Latham’s speech censoring John Howard for muzzling Mick Keelty last week.

 

I move:

That this House censures the Prime Minister for:

(1) political interference in the work of the Australian Federal Police, in an attempt to compromise the public standing and independence of its Commissioner;

(2) failing to rule out further political interference with the Australian Federal Police in the future; and

(3) jeopardising Australia�s national security by playing politics with the Australian Federal Police, rather than putting Australia�s national security first.

This is a desperate government led by a desperate Prime Minister who will say and do anything to get himself out of trouble, even muzzling and trying to humiliate the head of the Australian Federal Police. What happened to Mr Mick Keelty last week was an absolute national disgrace that compromised the role and independence of Australia�s chief law enforcement officer. Even worse, it compromised the integrity of those who purport to make Australia�s national security policy. It compromised the right of the Australian people to know the truth during these troubled these times and to know the truth about the threat to Australia and the foreign policy failings of the Howard government.

And what was Mick Keelty�s sin at the end of the day? His sin was nothing more than honesty. His sin, in the eyes of this Prime Minister, was nothing more than telling the truth.

What was it that drove the Prime Minister to reach for the phone and tell his chief of staff to get on the phone and harangue and complain to the Commissioner of the Australian Federal Police?

What was it that was so offensive to this Prime Minister that came from the mouth of Mick Keelty on that Sunday morning? This is what the Commissioner had to say on the Sunday program on 14 March. He said:

“The reality is, if this turns out to be Islamic extremists responsible for this bombing in Spain, it�s more likely to be linked to the position that Spain and other allies took on issues such as Iraq.”

That is all: the simple, plain truth�simple, plain honesty in what the commissioner would have thought were the best interests of the Australian people.

And it is the truth that the Australian people themselves understand. If you went to any shopping centre in this country and read those words out, people would say, �That is a statement of the obvious.� If you went to any playgroup around Australia and read those words out, people would say, �Well, that�s fair enough. That is a totally unremarkable thing for someone like the Australian Federal Police Commissioner to say.� If you went to any workplace in the country, they would say, in Australian language, �Oh, Mick Keelty�s being fair dinkum. He�s being fair dinkum. He�s calling it as he sees it. He is doing nothing more than that.� Yet this was the thing that was so offensive to the Prime Minister.

The commissioner had not even left the green room � he had barely got his make-up off�before he received the haranguing, complaining call from the Prime Minister�s chief of staff.

And what was it that was so offensive to this government? Well, Commissioner Keelty said it himself in the same interview a few sentences later. He said:

… I think there�s a level of honesty that has to exist here in terms of what the problems are … not only in Australia but in our region.

That is the thing that this Prime Minister finds so offensive. That is what has driven him to harangue and try to publicly humiliate the Police Commissioner: a level of honesty he has not got himself and has not got in the attitudes and policies of this government.

The truth is that Mick Keelty has earned the right to speak publicly on these matters. He more than any other Australian has earned the right to speak honestly about these matters. He is a fine police officer respected right around the country. He played a magnificent role in the Bali investigation�a magnificent role in every respect. He is indeed one of our national champions, and he did not deserve to be treated this way by a government that did not like the truth, that did not like honesty, that wanted to put its own narrow political interests ahead of Australia�s national interested, and that wanted to play politics with Australia�s national security.

It is a level of honesty that has offended the Prime Minister, but, quite frankly, it is no great surprise in this place, because this is a Prime Minister who finds it hard to handle the truth. We know that from the kids overboard; we know that from the ethanol scandal; we know that from the ministerial scandals that have led to the junking of the code of conduct; and we know that from weapons of mass destruction in Iraq.

It is a pattern of behaviour by this Prime Minister. With this Prime Minister there is always a missing piece to the puzzle; there is always something that he never tells the Australian people. He is always loose with the truth. That is the defining characteristic of his prime ministership and the way in which his government tries to run national security: always loose with the truth.

In this case, it was something that he did not want Commissioner Keelty to say to the Australian people � not something that was surprising the Australian people, not something that they would have regarded as out of the ordinary, but something that he did not want Commissioner Keelty to tell the Australian people � and that is that, while Australia was a target at the time of September 11, the government�s policy on Iraq has made things worse.

That is the thing that this Prime Minister did not want the Australian people to be told by the commissioner: that, while Australia was a target at the time of September 11, his government�s policy on Iraq has made things worse.

The Prime Minister did not want the truth out there publicly, so he attempted to muzzle and disparage the Commissioner of the Australian Federal Police. Within minutes of the commissioner being on the program, the Prime Minister reacts, his gut instinct: �Let�s cover up the truth. Let�s try and manipulate the situation, manipulate the information for narrow political advantage.�

It is the reflex action of someone who has been in politics too long, playing an old style of manipulating and trying to control the truth and the flow of information at any cost. So he is straight on the blower to his chief of staff and within moments the chief of staff calls, complains and harangues the Commissioner of the Australian Federal Police to try and make him retract, to try and make him toe the government line. He had not even left the green room.

And by Tuesday the commissioner had been forced into a so-called clarifying statement about which we are still trying to get answers. Was it urged and perhaps even written in the Prime Minister�s office? These are the questions the Prime Minister would not answer in question time today.

In fact, it is a funny thing: I read in Alan Ramsey�s column on Saturday in the Sydney Morning Herald a more revealing account of what happened straight out of the Prime Minister�s press office than what the Prime Minister gave the parliament today. What has happened to our democracy when there is a higher level of accountability in an Alan Ramsey column on a Saturday than from the Australian Prime Minister in question time in the House of Representatives? This is what Ramsay wrote:

“And when this column phoned Howard�s senior staff spokesman, Tony O�Leary, later that day, he confirmed Sinodinos had phoned Keelty about the Iraq remark – a “potential media problem”, he called it – and said Sinodinos had made the call only after a “conversation” with Howard.

There is greater accountability from Alan Ramsey in the Sydney Morning Herald on a Saturday morning tossed on your front lawn than from the Australian Prime Minister in question time in the House of Representatives.

This is political interference with an independent statutory officer. This is political interference of the worst kind with the top law enforcement officer in the land.

I have got to say this � and all Australians know it: politics has no place in the management of Australia�s national security. Politics has no place in trying to keep the Australian people safe and sound from the threat of terrorism. This should be about the national interest, not the narrow political interests of a Prime Minister who has been around too long and whose reflex action is to try and manipulate and control the information rather than have the truth out there available to the Australian people.

This is a government of control freaks that has gotten well and truly out of control.

Their first tactic, of course, was to disparage, to criticise and to try and run down the credibility of the Police Commissioner. On the Monday, the Prime Minister was out there implying that Mr Keelty did not know what he was talking about. This is what the Prime Minister said:

“There is a difference between the intelligence judgments that are brought to bear in relation to these organisations and the operational functions of police commissioners and police forces.”

He nods his head in agreement. Why then, Prime Minister, has the Attorney-General placed the following answer in the Hansard today? The Attorney-General has said in answer to a question from the member for Barton that Australian Federal Police officers seconded to the National Threat Assessment Centre will be:

“… fully integrated NTAC analysts and as such, will be directly responsible for the preparation of threat assessments.”

That appears in the Hansard today, which directly contradicts the Prime Minister�s statement last Monday when he said that the Police Commissioner and his organisation are not involved in intelligence judgments. No, they are involved in the preparation of threat assessment on the admission of the Attorney-General in the House Hansard today. After Bali and after the outstanding work of the Federal Police in Bali they received extra intelligence analysis that confirm the point that Mr Keelty was well-qualified and well capable of making these comments off his own bat; that he is well-qualified and well capable in the eyes of the Australian people in making these comments.

Then the campaign of criticism and disparagement of a good man, Mr Keelty, continued into the Tuesday. If you had to run a lottery, if you had to guess, about who was going to be the lowest of the low, of course, you would turn to the Minister for Foreign Affairs. When they need to go in for the low blow and when they need to go in for the lowest of all comments, they can always rely on the member for Mayo. This is what he said on Tuesday before the issue of the so-called clarification statement:

“I think he (Keelty)is just expressing … a view which reflects a lot of the propaganda we�re getting from al-Qaeda.

What a disgraceful thing to say about a good man. Here is Mick Keelty, a man who is dedicating his working life to stopping al-Qaeda, being compared by the foreign minister to al-Qaeda�s propaganda. And he is being compared by the foreign minister to their propaganda. You are a disgrace. You are a rotten lousy disgrace to say that about a good man � Mick Keelty. It is an absolutely shocking thing to do.

Mr Downer: Mr Speaker, I rise on a point of order. I think, through previous precedents as well as commonsense, it is perfectly clear that for the Leader of the Opposition to descend to such a vile language as calling somebody a rotten lousy disgrace definitely demands a withdrawal. It is way over the top and is language that demeans this parliament.

The SPEAKER�The minister will resume his seat. If it is necessary for me to remove one of the people I have warned, including those on the frontbench on both sides, in order to get order I will do so. The Leader of the Opposition will withdraw the reflection on the Minister for Foreign Affairs.

Mr LATHAM�At your insistence, Mr Speaker, I will withdraw, but I do point out that I do regard it as a disgrace that the Minister for Foreign Affairs would compare Mick Keelty to the propaganda we are getting from al-Qaeda. That is a disgrace, and it should be condemned in the strongest possible terms. This is someone who has dedicated his working life to stopping al-Qaeda and he ends up being compared to their propaganda by the Minister for Foreign Affairs.

It is indicative of a government of control freaks�muzzling and disparaging comment that was all about a statement of the obvious. The only sin that has been committed by the Police Commissioner is the sin of truth in the eyes of the government. He got outside the Liberal Party line. He got outside the Liberal Party line and they are still at it. They have not learnt from the experience of last week.

There was the Attorney-General on the Meet the Press program yesterday being asked whether the public has a right to see the Police Commissioner as an independent figure, not just like any other public servant and to surely be able to hear from him direct. The Attorney-General says, no, the Australian Federal Police Commissioner has no right, no public role; he is just an adviser to the government with no independent role and he has spoken directly to the Australian people.

That is unlike every single Police Commissioner in this country. Independent statutory officers have the right to speak directly to the Australia people on matters of concern when it lies within their judgment.

The great irony in this is that it is all about the government�s decision to send Australia to war in Iraq, and they did that in the name of freedom and democracy. Freedom and democracy was the justification this government gave for going to war in Iraq. Yet now the Commissioner, Mr Keelty, has not got the freedom to speak publicly in his own country. They have denied him the basic democratic freedom of speaking his mind directly and honestly to the Australian people. It is an absolute disgrace and it is being condemned by police commissioners and former commissioners around the country.

Why is it that this government has so much trouble facing up to the reality of its Iraq policy? Australia was a target on September 11, but the government�s decision-making in relation to Iraq has made the situation worse. We know that the situation has worsened.

The member for Warringah, the Minister for Health�the third ranking Liberal in the House of Representatives�said prior to the conflict: I have no doubt that there is a sense in which our actions have put us more clearly on the radar screen of terrorists.

Why is it so hard for the government to acknowledge that truth when it came from the mouth of the Minister for Health�the third ranking Liberal in the House of Representatives�prior to the conflict? Then just last Tuesday, Paul Wolfowitz, the US Deputy Secretary of Defense�wouldn�t you think he knew something about it?�and one of the architects of the war in Iraq said:

“So Spain has been a real standup country, and I suppose maybe that�s one of the reasons why they came under attack.”

So this is a truth that is acknowledged around the globe by people on the conservative side of politics, but it is not a truth that this Prime Minister will allow Commissioner Keelty to utter on national TV for the benefit and information of the Australian people.

It is a truth that has been repeated in this country by Ken Moroney, the New South Wales Police Commissioner.

So why cannot the government face up to reality? Why is it that they always need to put politics into our national security?

Our national security in fact needs to be based on the truth. It needs to be based on an honest assessment. The truth is that the government did not go to war with Iraq for regime change �the Prime Minister said as much at the National Press Club on 13 March last year; they went to find and destroy weapons of mass destruction that do not appear to exist. It is a failure of intelligence and a failure of policy.

This was the side of politics, the neoconservative side, that said that they had one big thing to offer in the war against terror � the doctrine of pre-emption. It is a policy failure now barely mentioned � hidden away in the attic like a mad uncle. The doctrine of pre-emption is barely mentioned by any of the neoconservatives. All the rhetoric about the axis of evil � was their big neoconservative contribution to the war against terror and now they cannot stomach the truth. They cannot stomach the truth of their policy failings.

Having committed Australia for a core purpose that was not realised � a core purpose that was not true in Iraq � they now cannot stomach the truth when it comes from the mouth of the Australian Federal Police Commissioner.

The real truth, Prime Minister, is this: the war against terror is primarily an intelligence war. It is not a war primarily against nation states. We have to target the terrorists. In fact, the conflict in Iraq diverted resources away from that process of targeting the terrorists � Al Qaeda and bin Laden. The capacity of intelligence to track them down and do something about them is the key to winning the war against terror. It is not the folly of Iraq; it is not the errors that this government made in committing Australia to that conflict.

Now the government should simply accept the truth of what Commissioner Keelty has been saying � the truth that, sure, Australia was a target at the time of September 11 but the conflict and policy making for Iraq has made the situation even worse.

This is the thing that we need to appreciate. This is the reason why the Prime Minister should be censured by the House.

You cannot trust the Howard government with Australia�s national security. It is always playing politics, instead of putting the national interest first.

The Prime Minister�s actions have disgraced the high office that he holds. He should not put narrow political interest ahead of the national interest�never. That is never in the best interests of our great country, and he should be censured by this parliament accordingly.

Speech to the Annual Business Symposium, Economics Society of Australia, Canberra, 2 October 2003

 

In an open dynamic economy, reform is not an optional extra. It is a necessity. In a world of economic change, reform should be the natural order of things.

Unfortunately, this is no longer the case in Australia. Our national debate has developed a reform blind-spot. The Howard Government is no longer interested in economic reform. It sees national security as a political winner and has lost interest in other issues and ideas.

The Australian economy faces a number of important challenges: the housing bubble, falling housing affordability, low national savings, a record Current Account Deficit, declining productivity and high marginal tax rates. Yet the Government is in a state of denial and inaction.

Can anyone remember the last time Peter Costello gave a serious speech on economic reform? It is only a matter of time before this policy complacency catches up with the Government and the Australian economy.

The reform blind-spot, however, goes beyond the Howard Government. It is a regular part of political commentary in this country. One of the good things about being in the Labor Party is that we get attacked from both ends of the political spectrum – the far Right and the far Left. This usually confirms that we are on the right track.

In practice, the far Right and the far Left are on a unity ticket. They are both very good at saying why something should not happen, why things should stay the same. They are on a unity ticket against reform.

For Right-wing conservatives, of course, this is hardly surprising. Arguing against change is their stock-in-trade. Tory elites like Tony Abbott and David Flint are more interested in the past – winning the history wars and preserving the English monarchy – than the future of the Australian economy.

But what I find really puzzling is Left conservatism: knee-jerk opposition to new proposals and new ideas. These commentators are good at outlining the things they oppose but never the things they favour. I can never understand how they expect to create a better and fairer society by supporting the status quo.

I can assure you this is not the Labor way. We believe in economic reform. We built the modern Australian economy during the Hawke and Keating years and we want it to adapt to changed circumstances. We want to implement a new reform agenda, to give the Australian economy a second round of productivity gains and competitive advantages.

This is unashamedly an interventionist strategy. When markets fail, governments must intervene with policy reforms. This is why we need industry policy, to correct the market’s failure to invest adequately in research and development. This is why we need labour market programs, to correct the market’s failure to invest in the skills of low-paid workers and the unemployed. This is why we need competition policy, to overcome the market’s tendency towards collusion and industry concentration.

Competition Policy

Private sector competition has always been central to Labor’s economic agenda. Trade practices law, lower tariffs, financial reform, new markets in energy and telecommunications – these are all Labor legacies. The Tories talk about markets but they never reform them. They talk about competition but they never implement it.

This is the big difference in Australian economic policy. Labor believes in competition and productivity. Our political opponents believe in business deals and preferment – a system of crony capitalism, in which selected companies receive government subsidies and favouritism.

This has always been the Coalition way. It was the basis of McEwenism in the 1960s. It was the way in which Malcolm Fraser and John Howard ran the Australian economy in the 1970s and early 80s. It is now a feature of the Howard Government’s industry policy – its shameful record of preferment in the alternative fuels sector.

When markets are distorted in this fashion, investment flows into inefficient uses, damaging economic growth and employment. We all suffer because of rorted public policy and government favouritism. The growing damage to the Australian ethanol industry confirms the folly of this approach.

When they work properly, the good thing about markets is that they aggregate all our interests. You don’t have to be someone’s mate to market a product or sell a service. Of course, inequality – inequality of income and especially of wealth – determines the level of participation in the market. The rich can buy and sell more than the poor.

But when I look at the economy and compare it to society, the inequality of income and wealth is dwarfed by the inequality of power and political influence. Many can get access to the market, but very few people can get access to a Liberal Prime Minister.

This is why the public sector needs to be above preferment and dealism. If governments, elected by the will of the people, do not treat people fairly in the market then nobody else will. This is the real tragedy of crony capitalism: it takes the inequality of the market system and magnifies it many times over through the corruption of the state.

Governments do not need to mould the market economy. They need to open it up to competition. This involves the dispersal of economic power and privilege – one of the basic principles of the ALP. We believe that those with limited resources should not have to pay higher prices in concentrated markets. We believe that the nation’s consumers should not be limited in their choices. We believe that economic investment should be allocated in a way that maximises the national economic interest.

And we believe that the executives at the top-end-of-town who insist on change for others, should not be immune from it themselves. Through competition policy, we want opportunity for all and special privileges for none. This is where the efficiency and equity arguments come together.

The obscene growth of executive salaries and payout packages in recent years has had a negative impact on staff morale and incentive. It is one of the factors holding back productivity in the Australian workplace. Why should workers put in long hours and extra effort when the financial benefits of their labour are captured by just a handful of senior executives? Greater economic equality, with a genuine system of gain-sharing and reward for effort, can help boost labour productivity.

Take the example of the Commonwealth Bank’s CEO, David Murray, who last week received a $200,000 pay rise, taking his annual salary to $2.5 million. This coincided with his announcement of the abolition of 3,700 jobs. This double standard sends a jaundiced message to the bank’s staff: an obscene amount of money for the CEO; job insecurity and inadequate pay for the people who do most of the work.

Indulgences of this kind are a product of greed and anti-competitive markets. Anyone who has met Mr Murray would know that, while a dogged and strong person, he is not worth $2.5 million. Anyone who understands the Australian banking system would know it is not that hard to turn a profit. The level of competition is so low that Australia’s banks have the highest margins in the Western world. With compliant boards and disempowered shareholders, the top executives have been given a blank salary cheque.

Competition policy is the best way of cleaning out the rorts and featherbedding of concentrated markets. Economic efficiency and fairness can co-exist. Competitive pressures help companies to upgrade their technology, expand their markets and lower their prices. They also help to level the playing field, exposing the indulgences of big business and giving smaller players the chance of market entry. This is why I am unequivocally pro-competition.

Private Sector Competition

Since 1995 the competition debate in Australia has concentrated on the public sector. This was an important reform process, with a major boost to growth and living standards. According to the Productivity Commission, the Hilmer reforms have increased GDP by 2.5 percent and household incomes by an average of $7000.

Post-Hilmer, Australia needs a new competition agenda. Over the past eight years, the focus has gone off the private sector, with a loss of competition in many parts of the economy. Under the Howard Government, market competition is in decline, with the private sector trending towards duopoly and oligopoly. This can be seen in the retail, banking, airline, media and telecommunications industries and, of course, ethanol. The purpose of Labor’s competition policy is to put the spotlight back on the private sector and the need for trade practices reform.

In terms of market concentration, the evidence is damning. In the grocery sector, Australia has a near-duopoly, with Coles Myer and Woolworths enjoying 76 percent of the market. By comparison, in the United States, the top five grocery retailers have one-third of the market. Wal Mart, a huge company by international standards, has a market share of just 15 percent. In the United Kingdom, the top three retailers occupy no more than 55 percent of the market.

The trend to duopoly is widespread. Beer manufacturing in Australia is restricted to two brewers, with 90 percent of the market between them. In domestic aviation, the situation is now worse than the bad old days of the two-airline policy, with Qantas taking a dominant 70 percent market share. In the expanding area of health care, the top two pathology services have 80 percent of the market. Even in the relatively dispersed pharmaceutical sector, the top three retailers have a market share of 45 percent.

To make things worse, the Howard Government wants to abolish Australia’s cross-media ownership laws and entrench Telstra as a near-monopoly in the telecommunications market. Bit by bit, the market reforms and competition of the 1980s and 90s are being unravelled. The Coalition is pro-business and pro-preferment. Only Labor is pro-market and pro-competition.

This is the essence of our economic record. Labor’s first wave of change was to open up the economy to international competition. In the second wave, Labor introduced Hilmer and national competition policy. The next Labor Government will embark on a third wave of change, equally robust, increasing competition in the private sector, increasing Australia’s productivity and living standards.

We will strengthen the Trade Practices Act and increase the powers of the ACCC. Our approach is competition where possible, regulation where necessary. Our goal is to shift the balance of economic power away from big business and towards small- to medium-sized enterprises. In practice, I want the Trade Practices Act to be a Small Business and Consumer Protection Act.

Labor’s first task is to repair Section 46 (abuse of market power), especially given the High Court’s decision in the Boral case earlier this year. Even though the ACCC showed that Boral was pricing below avoidable cost in order to eliminate a competitor (that is, predatory pricing), it was unable to demonstrate that Boral had substantial market power (under the terms of Section 46). The court indicated that financial strength did not equate to market power.

Post-Boral, small business in Australia has next to no protection against anti-competitive conduct. Section 46 is an empty shell. The ACCC has won just two cases on abuse of market power in 13 years. As Allan Fels has said:

It defies belief that there have been only [two instances] since 1990 where big business has used its market power to harm competition If Section 46 does not work then one of the most important protections of competition is missing from the Australian economy.

Labor’s policy is to outlaw predatory pricing, irrespective of the market power of the companies involved. We will amend Section 46 to prohibit anti-competitive predatory behaviour. We will also strengthen the current ‘purpose test’ to allow the ACCC to infer an anti-competitive purpose from the conduct of the corporation or the circumstances of the case.

Another important reform is to crackdown on hard-core cartels. This is a growing problem in the global economy. Collusion is not just a matter of bad corporate behaviour. It is a characteristic of industries where concentrated ownership encourages collusion to take place. This is why Labor will introduce criminal sanctions for cartels that engage in bid rigging, market sharing, output restrictions and price fixing. Amid the public demand for governments to get tough on law and order, it is time to apply the full weight of the law to the corporate sector.

Labor also supports the collective bargaining recommendations of the Dawson Review, the only provision from the review process to assist small business. We believe in rebalancing the Trade Practices Act – giving small business a level playing field on which to bargain with big business.

This is our first instalment of trade practices reform. A number of other issues are also being considered as part of Labor’s policy review. These include:

* The introduction of cease-and-desist orders to give immediate relief to small business and consumers from the abuse of market power. This is an international standard among competition regimes.

* Stronger provisions to deal with the underlying causes of collusion and anti-competitive behaviour – that is, markets with a high degree of concentration and control. In 1991, for instance, the Senate minority report on Monopolies and Acquisitions recommended that: “in cases of serious and persistent misuse of market power, the courts should have the power to order divestiture of the assets or component parts of the offending corporation”.

* New powers to deal with the problem of creeping concentration: allowing the ACCC to treat a series of acquisitions as one event. This is a big issue in the retail sector, where Coles Myer and Woolworths have acquired up to 90 independent grocers since 1995.

* Reviewing the provisions of Section 51AC, which deals with unconscionable conduct in relation to small business. The High Court’s Berbatis decision in April has raised doubts about the scope and effectiveness of this provision.

* Improving the coverage and success of the ACCC’s prices surveillance role, which has fallen away in recent years.

* Providing better protection for franchisees in disputes with the parent franchise company. Too many franchisors are able to abuse their market power and contractual obligations without any effective sanction under the current law.

* Improving the transparency and accountability of the ACCC, especially with regard to undertakings and authorisations. Markets rely on quality information and disclosure from government regulators.

This is a long list of issues for trade practices reform. It demonstrates the difference between Labor and Liberal. While the Government is yet to enact any of the recommendations of the Dawson Review (as limited as they were), the Opposition is working on its second instalment of competition policy. An economic reformer’s work is never done.

Conclusion

If Labor wins the next Federal election, we will not be ‘returning’ to office. We will come to power as a renewed Party to form a new Government. We will not be turning the clock back to 1996. Our agenda is about the future: giving Australia its next wave of productivity gains and competitiveness.

Competition policy is crucial to Australia’s future. Domestic rivalry helps to create a more efficient and dynamic economy. If we are to keep pace with other nations we must continually upgrade our skills and inventiveness. Competition policy is also about justice. It gives people the freedom of market entry and the opportunity to grow their business without the threat of anti-competitive behaviour.

The Howard Government talks a lot about the rights of small business but it has done nothing to improve these rights under the Trade Practices Act. Given a choice between the demands of big business and the needs of small business, the Liberals always go for the big-end-of-town. Even its Coalition partner is blowing the whistle. As the Federal Director of the National Party said recently:

The Liberal Party is seen as very good at representing the large end of town but it struggles to relate to the challenges of the average family and the average small business.

Labor has always put the interests of consumers and small business first. That’s why the Whitlam Government established the Trade Practices Act in 1974. That’s why the Keating Government strengthened the Act in 1995. That’s why the next Labor Government will implement a third wave of private sector competition policy. From where we sit, too much competition is never enough.

Speech to the International Chief Executive Officers Forum in Canberra, August 19

Tonight I want to talk about the big difference in Australian economic policy, the big difference between Labor and Liberal. Labor believes in competition and productivity. Our political opponents believe in business deals and preferment. They believe in business. We believe in markets.

I want an economy governed by private sector competition and corporate social responsibility. The Liberals lean towards crony capitalism, a corporatist state in which some firms receive subsidies and special deals from government.

This has always been the Coalition way. It was the basis of McEwenism in the 1960s. It was the way in which Malcolm Fraser and John Howard ran the Australian economy in the 1970s and early 80s. As the development of ethanol policy has shown in recent times, the Prime Minister has reverted to type. As he and his government have grown older, they have slipped further and further into cronyism.

History tells us that crony capitalism emerges and evolves over time, with five stages of development:

1. The creation of political appointments or jobs-for-the-boys, of which the Howard Government has made over 100 since its election in 1996.

2. The loss of fiscal discipline and widespread funding of special interests.

3. The misleading of parliament and the people – a pattern that has now emerged in the Howard Government, from Kids Overboard to Iraq’s uranium out of Africa to the current Manildra-gate controversy.

4. The allocation of special privileges and power to associates of the government – something that featured, for instance, in the recent Cash-for-Visas scandal.

5. And finally, the abandonment of competition policy by awarding government funds, protection and preferment to selected firms in selected industries.

For those of us who believe in fair trading and an open market economy, this last problem is the most serious. In its final form, crony capitalism involves the allocation of publicly funded privileges to the few at the expense of the many (working class taxpayers and consumers).

This is why it is so repugnant to the Labor movement. It perverts the rule of law and increases inequality. It transfers power and privilege from working people into the hands of corporate elites.

Mr Dick Honan

The Manildra-gate controversy is a good example of this process. It has not only involved the misleading of the parliament, it has also debased the integrity of economic policy in this country.

What we have seen is the formation of a public-private cartel: the Howard Government working hand-in-glove with one company, Manildra, to disadvantage every other company in the ethanol market. This is more than just picking industry winners. It is picking one company in a particular industry – in this case, the dominant ethanol producer in Australia – to protect and preserve that company’s near-monopoly status.

This is a stunning example of crony capitalism at work. Let me explain the sequence of events and the perversion of public policy.

On 24 July last year representatives of Trafigura met with Manildra in an attempt to secure domestic ethanol product. Manildra stalled and then refused to supply Trafigura and another competitor company, a small Australian-owned firm called Neumann Petroleum.

On 1 August the head of Manildra, Mr Dick Honan, met with Prime Minister Howard. At this point, Manildra had an important piece of market information: if it did not supply Neumann and Trafigura, the only way in which they could obtain their product was from overseas. The official record of the meeting shows that Mr Howard and Mr Honan discussed: “The payment of a producer credit to ethanol producers to enable Australian ethanol producers to compete with the cheaper Brazilian product.”

On 10 September Cabinet decided to act on Honan’s request by imposing excise on ethanol and paying an equal production credit for domestic producers. By this time, Neumann and Trafigura had arranged an ethanol shipment from Brazil. In an amazing act of favouritism, the Government used the resources of the Australian Embassy in Brazil to monitor the shipment and ensure that it could never dock profitably in Australia.

The fix was in. While Honan had received a public subsidy of more than $200 million, his two competitors were stranded on the high seas with ethanol losses of $1 million. And the Howard Government did not even have the decency to tell Neumann and Trafigura of the new policy arrangements. It sat and watched the shipment cross the Pacific Ocean, knowing that this would financially damage Honan’s competitors.

Not surprisingly, Paul Morton, the head of Neumann and its 59 staff, described the decision as: “Pernicious and treacherous. The way that they did it was absolutely meant to punish Trafigura and Neumann. They weren’t just changing the law to protect Manildra but were setting out to cause us a financial loss.”

If these things had happened solely in the private sector, the members of the cartel would have been prosecuted under the Trade Practices Act. It is one of the worst pieces of public policy in memory, a signpost in the deterioration of the Howard Government.

We all have an interest in this case study, especially in the business community. The market economy relies heavily on the rule of law: fair trading and competition rules for all companies, not just the mates of the state. Fair-minded businesspeople and investors should be outraged by the Manildra decision.

When markets are distorted, investment flows into inefficient uses, thereby damaging economic growth and employment. We all suffer because of rorted public policy and government favouritism. Indeed, the growing damage to the ethanol industry in Australia has confirmed the folly of corporate capitalism.

When they work properly, the good thing about markets is that they aggregate all our interests. You don’t have to someone’s mate to market a product or sell a service. Of course, inequality – inequality of income and especially of wealth – determines the level of participation in the market. The rich can buy and sell more than the poor.

But when I look at the economy and compare it to society, the inequality of income and wealth is dwarfed by the inequality of power and political influence. Many can get access to the market, but very few people can get access to a Liberal Prime Minister.

This is why the public sector needs to be above preferment and dealism. If governments, elected by the will of the people, do not treat people fairly in the market then nobody else will. This is the real tragedy of crony capitalism: it takes the inequality of the market system and magnifies it many times over through the corruption of the state.

Mr Peter Costello

To their credit, the Departments of Treasury and Finance strongly opposed the Government’s ethanol rort. Unfortunately, the Treasurer Mr Costello did not support them. In Parliament last week he called it a good decision and said that: “There are [many] Australians who lobby the Government on particular issues that affect them. In fact, it is very hard to say ‘No’.”

A Treasurer who can’t say ‘No’ is a Treasurer who can’t control the budget. A Treasurer who can’t say ‘No’ is a Treasurer who can’t stop spending on interest groups. This is why the Howard Government is the highest taxing, highest spending government in Australia’s history. It lacks fiscal rigour.

This is one of the characteristics of crony capitalism: the funding of sectional interests ahead of the national interest. The Special Interest Express is back in town. It hasn’t been seen since the days of the Fraser Government but under Mr Costello, it has pulled back into Canberra station.

Since 1997 the Government has been on a $90 billion spending spree. It has been living off the fat of bracket creep and running down fiscal policy. The surplus is now running on empty, with a fiscal balance of 0.1 percent GDP. The following table details the damage:

Deterioration in Budget Bottom Line: Net Impact of Policy Decisions: Year $Million

1997 296

1998 20649

1999 11691

2000 7384

2001 25630

2002 5313

2003 18570

Total 89533

I’ve been Shadow Treasurer for just six weeks, and it seems that every second day there is another story about government waste and mismanagement. The list reads as follows:

* A $30 million bailout package for the Job Network.

* A $26 million bailout for the Government’s flawed higher education policy.

* GST fraud of $3 billion through the falsification of TFNs and ABNs.

* Another $50 million in public money for Manildra.

* A $7 billion increase in the black economy to 15 percent GDP.

* Handouts to business lobby groups totalling $60 million.

* A $2 billion blow-out in the Defence Budget.

* And the mother of all waste and mismanagement, a new Commonwealth logo and the reprinting of Commonwealth letterheads.

This is the problem with the Treasurer: he has never seen a tax he didn’t like and an example of waste that he could ever stop. He has abandoned the integrity of fiscal policy and placed all the weight of macro policy on the Reserve Bank. This is placing upward pressure on interest rates and destabilising the Australian economy. As ever, we all pay a price for bad public policy.

Mr Graeme Samuel

Costello’s cronyism extends beyond Manildra and his fiscal extravagance. He has fought a long battle with the States to install his Melbourne mate, Graeme Samuel, as the head of the ACCC. Labor is opposed to this appointment on the grounds of independence and objectivity.

We do not believe that someone who lists his occupation as a “company director and corporate strategic consultant” should be in charge of corporate competition policy. We do not believe that someone who has publicly supported insider trading should be in charge of the trading rules of the private sector.

In response, Mr Samuel has said that: “It is universally acknowledged that poachers make the best gamekeepers.”

By this logic, Robbie Waterhouse would be in charge of the AJC and Fine Cotton would be running in the third at Randwick. A poacher is a poacher, and he should never have been appointed as the competition regulator.

Allan Fels was always asking for more power and resources for the ACCC. In his first policy announcement last week, Mr Samuel asked for voluntary industry codes. This is the wrong emphasis and the wrong approach.

In government, Labor will strengthen the Trade Practices Act and increase the powers of the ACCC. This is not a question of being pro or anti-business. It is a matter of being pro-competition and pro-productivity.

I believe in competition policy. It is the key to economic growth and consumer satisfaction. Companies will not upgrade their technology, expand their markets and lower their prices without the pressure of market competition.

Under the Howard Government, private sector competition is in decline, with the economy trending towards duopoly and monopoly. This can be seen in the retail, banking, airline, media and telecommunication industries and, of course, ethanol.

Labor will reverse this trend by beefing up the Trade Practices Act. We have already announced our commitment to introducing criminal sanctions, attacking predatory pricing and overhauling Section 46 (abuse of market power). I am now looking at other ways in which the Act can be enhanced. Labor is a true believer in competitive capitalism.

The National Interest

The problem with crony capitalism is that it undermines the national interest in economic policy. This is a point well understood in the Treasury but not by the Treasurer. Recently the head of the Department, Ken Henry, warned against complacency in economic policy. He called for a lift in productivity, saying that: I consider it very unlikely that Australians would find their aspirations satisfied by maintenance of the present relative productivity position. There is a strong case, on economic and social grounds, for striving to bridge the productivity gap [between Australia and the United States].

This has always been Labor’s goal. Our economic tradition and values are for competition and productivity. In 1996 we left Australia with a strong legacy of reform. These were the national interest policies that the Liberals were too timid to implement: a floating exchange rate, financial deregulation, tariff liberalisation, competition policy and national superannuation.

One of the limits to microeconomic reform, of course, is that it can only be done once. Having opened the Australian economy to market competition in the 1980s, it cannot be opened a second time. Ultimately, the gains from micro reform start to diminish. New policies are needed to lift the long-term growth rate of the Australian economy.

This is where the findings of new growth theory are so significant. Traditionally, economists have identified material objects as the main drivers of economic growth. Neoclassical theory emphasised the importance of capital investment, while Keynesians emphasised the need for increased consumption. In both cases, the growth rate is limited by the finite nature of these material goods.

By contrast, the new growth theorists argue that research and technological enhancement are the main drivers of growth. Instead of focussing on the accumulation of objects, economists need to focus on the accumulation of ideas. In particular, education and research are the ‘twin-carburettors’ of economic expansion.

This is a persuasive body of research. Across the Western world, economic activity is becoming less resource-intensive and more knowledge-intensive. Jobs based on repetition and muscle power are disappearing, replaced by work in the information and service sectors.

In the long run, open and creative economies that apply new ideas to the production process will achieve the highest rates of growth. This is where Australia is most vulnerable. The Howard Government is bogged down in dealism and corporate welfare. It has given a low priority to education and innovation. As Australia’s leading new growth economist, Steve Dowrick, has argued:

“Compared with the OECD economies, Australia invests less of its resources into R and D, and a lesser proportion of that investment is carried out within the business sector … Even though an open economy can benefit substantially from research conducted overseas, the magnitude of the returns to domestic R and D are such that a major increase in research effort is called for, especially in the case of a relatively poor R and D performer like Australia.”

Dowrick’s research points to the unique nature of knowledge as an economic resource. Unlike capital and consumption spending, access to information is relatively unlimited. It has the characteristics of a public good, such that one person’s use of an idea does not necessarily harm the access rights of other people. This is why companies tend to under-invest in R and D – they cannot realise all of the economic benefits that flow from their investment.

The dispersed nature of knowledge also produces another important effect. Education and research outlays generate huge spillover benefits for society. For R and D expenditures, Dowrick estimates a social return of between 50 and 60 percent, an extremely high rate of public benefit.

So what does this mean for economic policy? Two conclusions stand out. The case for increased government investment in education and research is compelling. But so too, increased private sector investment is in the public interest, especially when it lifts inventiveness and product innovation.

This is not a zero-sum exercise. The unique nature of knowledge investments can produce win-win outcomes in public policy. The best way of increasing Australia’s economic growth rate is to increase the level of education, training and research. This is the basis of Labor’s productivity policy.

Conclusion

In this new role as Shadow Treasurer, the media have been speculating about my relationship with business. Certainly I want to do things differently to Mr Costello. I don’t believe in crony capitalism and the concentration of privilege. I don’t believe in pandering to special interest groups and blowing the budget surplus.

I’m not part of Melbourne’s high-society. I live in the last street in the last suburb on the fringe of South-West Sydney. I like being an outsider and want to keep it that way. None of my family or friends have ever owned big businesses or been corporate consultants. We grew up thinking that Toorak was the name of a horse race.

My only interest is in good economic policy and the integrity of economic markets. The people that I represent don’t have access to the Cabinet table or the ear of the Prime Minister. We have a fairly simple set of values and beliefs. We ask for nothing more than the rule of law, fair decision-making and the provision of community services.

When governments take these things away and look after the insiders, we lose out badly. Life becomes even tougher in the outer suburbs. This is why I believe in the discipline of market competition and corporate responsibility. This is why I believe in the active role of government and service provision.

They are a poor boy’s arsenal against inequality. This is why I got into politics in the first place. I believe in the benefits of competitive capitalism and the solidarity of a strong and fair society. Always have and I always will.