Judy Jackson, Tasmania's Attorney General, has announced that Tasmania will join New South Wales and Western Australia in challenging the constitutionality of the Howard Government's IR laws. I think this a good thing. Anything that can stall the rampant anti-federalism emanating from Canberra is a positive. The States need to be more diverse and heterogeneous in their economic policies. Canberra dictating from afar is not a good thing.

I could not find any statement directly by Judy Jackson. So I am dependent on the ABC political feed and the Mercury internet site for any scrap of news on the issue . Note to Judy Jackson; you can speak to me, and anyone else directly by either posting it on the MHA website, a personal website, or a blog. Coverage by both the ABC and Mercury is pretty poor. I couldn't find anything in the Examiner's website . Which is even worse in terms of usability than the Mercury's. Tasmania's politicians and news outlets need to become more internet friendly.

From the Mercury article ;

Ms Jackson said the reforms would create uncertainty and insecurity and "will guarantee that workers will be exposed to bullying, coercion and harassment".

Women in the workforce would be especially vulnerable, Ms Jackson said.

She said the laws would remove all protection against unfair dismissal for most women in Tasmania and there would no longer be any compensation for redundancy for most women workers.

She said new state laws -- to take effect from February 1 -- would, in part, help to protect existing conditions of employment for many.

Nothing there about the IR laws being illegal and unconstitutional federal encroachment on state rights and responsibilities. I presume the law case is not about whether Tasmania or the Federal government can be "fairer".

Rene Hidding, Opposition leader in Tasmania offered;

"The state Liberal team fully support the Howard Government workplace relations reforms to provide higher wages, more jobs and a stronger economy and the Lennon Labor Government needs to stop scaremongering on this issue."

Anti-federalism and unitary government was never a Liberal platform. Since Gorton embraced the federal system as the sole authority for policy making, and the states simply being to disburse the funds in support of federal policy, the Liberal Party has become anti-federalist.

All the major parties in Australia are hostile to federalism, Liberal, Labor, Greens and Democrats - all see the states as being dissolved and there being no government between the federal and local council level. In reality the thin levels of government are supposed to be the federal and local levels with the state government carrying the most responsibility and weight of governance.

The federal and local levels of government are supposed to be focused on specific areas and problems of governance. If it does not have international significance, then the federal government should not be involved. For instance, foreign policy, international relations, defence, inter-state tariffs etc are natural federal responsibilities. Education, Health, and Industrial Relations are not.

Guy Barnett is quoted as saying;

This political stunt by the Tasmanian Government and other Labor state governments is doomed to fail, because they know that where there is a conflict between state law and federal law the federal law will prevail.

They are deliberately wasting taxpayers' money for purely political reasons.

Barnett is right. One of the most anti-federalist institutions in our country is the High Court of Australia. The Australian Constitution is a static document, almost impervious to change. Referendum's fail as a matter of course against it. Lionel Murphy changed the High Court from one of strict legalism, to one which saw the constitution as a living breathing document that could be moulded by Judicial decisions. Not the will of the people through referendums, but by High Court interpretations. Murphy wrote;

The Australian constitution does not express all that is intended by it: much of the greatest importance is implied. Some implications arise from consideration of the text: others arise from the nature of the society that operates the constitution.

Why don't we just admit the truth. The "Bearded Men" did a half-arsed job with the Constitution such that it is a pre-enlightenment view of government. Further, they made it so hard to change by referendum that politicians and judges run an end-game around it with implied intentions and meanings. This largely goes without approval of the people and ends up with a massive collapse of power to the centre - in this case Canberra. Australia was founded on federalism and the heterogeneous protections that gives from tyranny, political entropy and unitary outcomes.

The Australian Capital Territory Treasurer Ted Quinlan and federal Territories Minister Jim Lloyd have rejected a plan to make the ACT an income tax and payroll tax haven . One of the problems facing the States is that Federal government's taxing of income and GST enforce homogeneity on the states. They have little chance to differentiate themselves or to innovate in areas of tax and economic policy. The Federal Government's unitarianism is an impediment.

This proposal has been put forward by the Canberra Institute. This is a think-tank with no internet presence what-so-ever. How can they be so stupid? I am getting annoyed that every article or rafferty's I write now has an opening paragraph which berates the ignorance of politicians, media, think-tanks and other industrial structures when it comes to the internet.

Anyway, I am stuck with trying to make sense, or an opinion, with what the Canberra Times has written on it. Stephen Bartos has put his backing to it. Bartos is a Director at the National Institute of Governance . But without more detail it appears that the plan consists of;

The plan would "declare the ACT and Jervis Bay tax-free advantage areas for both ACT residential PAYE [Pay As You Earn] and company taxpayers. ... The GST, and the Medicare and superannuation guarantee levies would remain from the Commonwealth and the ACT would continue to collect stamp duty, car registration and rates.

That is very innovative, and would probably draw people to Canberra. If the ACT had control over the income tax, they could lay a flat tax of say 5% and use that to fund health and education - they could let the federal government keep any GST revenues in return. But the federal government collecting all income and sales taxes for the states leaves them little room. Jim Lloyd's spokesperson was quoted as saying;

Minister Lloyd notes the idea proposed by the Canberra Institute as interesting but impractical in the context of the national taxation scheme," she said. "The Australian Government administers tax in the interests of all Australians, and the proposed changes would advantage one part of the Australian population over others.

Unitarianism. Canberra sees us as one homogeneous lump. This leaves no room for States to compete for skills, for workers, for families, for businesses or investment through state-based taxation, economic or labour policy. The federal government is inhibiting innovation. Supposedly the Liberals are about competition and free-market policies. They are against it when it dilutes their power at the federal level.

This is the failure of the Australian political system, it enforces federal conformity, entropy, weight and inertia. It is an inhibition to the states innovating and competing against each other.

The United States is a far more diverse federal system with greater state independence than Australia. On Sunday's you see New Yorkers streaming across the Hudson River to the malls in New Jersey. This behaviour is a result of sales tax being lower in New Jersey. New York competes in return by having "no sales tax" days.

Because the GST is leveraged by, and collected by Canberra before being disbursed to the States. The competition New Jersey and New York have over sales tax cannot occur in Australia.

Another example of American states competing against each other is Delaware's incorporation laws ;

More than half a million business entities have their legal home in Delaware including more than 50% of all U.S. publicly-traded companies and 60% of the Fortune 500. Businesses choose Delaware because we provide a complete package of incorporation services including modern and flexible corporate laws, our highly-respected Court of Chancery, a business-friendly State Government, and the customer service oriented Staff of the Delaware Division of Corporations.

This small state has captured a good chunk of the American incorporation market.

One of the few Australian States who has maintained a somewhat independent stance is good ol' Queensland. it still pursues development state policies which are more reminiscent of the autocratic Asian nations. One of the independent policies is the Queensland Fuel Subsidy Scheme . This knocks approximately 8.5c off the cost of each litre of petrol.

I am sure this act of local and regional policy making will meet a green federal challenge in the future where a federal government will use the power of Canberra to force homogeneity on Queensland and bring them into line with every other state. As it is the Federal government is forcing the states into a corner anyway with its own fuel taxes ;

One question remains to be answered. Why has the Commonwealth been allowed to escape criticism regarding underprovision of infrastructure and services, and the problem of traffic congestion?

While state and local governments have nominal responsibility for provision of most infrastructure and services, the Commonwealth controls the main sources of tax revenue. Hence, state and local governments depend on grants that are inadequate to meet their responsibilities.

The Commonwealth refuses to give back more than 16 per cent of fuel tax revenue for road infrastructure, and will not cut the fuel tax rate to make room for congestion pricing by state or local governments. So while special interest groups try to bludgeon the Queensland government into reallocating fuel subsidy monies in accordance with their particular interests, the Commonwealth laughs all the way to the bank.

Big government in Australia has a name - it is the Federal Parliament. It is enforcing control on the states through its taxation policies. This leaves the states homogeneous and incapable of reacting to regional economic pressures. The federal government is acting like a monopoly, extracting rents from the states and inhibiting innovation.

cam

One of the arguments in Australia against federalism today is that it was politically necessary in 1901 in order to get the colonies to come under one government - and today that is no longer a political need. Federalism is a form of political organisation that has positive benefits beyond the historical reasons for Australian federation. These include; decentralisation, geographical balance of powers, policy diversity and local autonomy and representation.

This isn't nostalgia for some mythical Australian past; a federalist system is a superior form of constitutional and political organisation.

Benefits

A Unitary Government which sits in Canberra would make policy for the whole country. Someone in Perth would be under the same policy as someone in Sydney. Since they are highly different cities, with one economy getting rich of a resource economy, while the other is prosperous of a services economy, this just does not make sense policy wise. Unitary policy would mean that bad policy affects all at the same time.

A decentralised system where each state has a different policy response is far more robust, and able to route around failure. It also allows policy to be made for local conditions and concerns. Another example here is that Queensland pursues development-state economic programs similar to Asian countries. Where New South Wales, Victoria and Western Australia do not.

This has led Queensland to have a mix of a resource and services based economy, which is more balance than the western and eastern economies. A unitary policy from a central government would not have this level of provincialism or local interest.

Another argument for decentralisation is that the form of asymmetric warfare that has appeared with globalisation feeds on centralised structures in order to disrupt and paralyse a political system. A decentralised structure, such as federalism, can limit the damage that a successful and sustained asymmetric attack can have. It is far more resilient a system in this respect than a unitary one.

The Long Path To Centralism

If the benefits of federalism are so obvious, why has the Australian federal government fallen into chronic centralism? Several reasons, the federal government is openly hostile to the states, the constitution is poorly written and doesn't limit federal taxing power or responsibilities; and thirdly, the High Court has aided and abetted the federal government in its hostility toward the states. Greg Craven writes;

For all the constitution's triumphs, the founding fathers were not good accountants. They produced a document which, like a sloppily drawn will, quite unintentionally left the Commonwealth flush with funds and the states destitute.

The federal government brings in nearly seventy five percent of all tax receipts in Australia. Over half the NSW budget is made up of Commonwealth grants and GST revenues where the federal government has written the checks to the states. This is known as a vertical fiscal imbalance. Richard Webb describes this in Australia as;

... the States have relatively large constitutionally-assigned spending responsibilities but few own-revenue sources whilst the reverse is true at the Commonwealth level. The difference between the relative revenue and spending responsibilities of the Commonwealth and States is known as vertical fiscal imbalance (VFI).

On the High Court, Gary Sauer-Thompson writes;

The history of federalism, cooperative or otherwise, has been a history of continual intrusions by a central government in the affairs of the states. That intrusion has been legitimated by the High Court--that keystone of the federal arch. Simply put, the High Court failed to protect the states through the long centralist march.

During World War II the federal government claimed authority over income tax which had previously been the sole domain of the states. This was challenged constitutionally by the states, but the High Court ruled in the federal government's favour. What was an emergency tax at the federal level to pay for WWII, has become the norm. The federal government had no intention of giving up such an important source of revenue once it got its hands on it.

Craven concludes that these have contributed to making sure, "that the states are skint, friendless and without recourse to law."

What to do?

Unfortunately, no original link to the article, but Ken Parish writes of a possible political solution;

The States should all agree to set up a Joint State Tax Office that would levy a uniform state income tax on all Australian individuals and companies. The rate should be set so that it covers all state spending needs, so that the States can afford to tell the Commonwealth to shove its GST revenue and section 96 tied grants where the sun don't shine. The Commonwealth would then be under intolerable pressure to reduce its own tax take back to the level required to fund only it own spending needs. It should be fairly easy for people to see which polity was guilty of greed and duplicity in that situation, and it wouldn't be the States.

The main problem is constitutional. A republic would take care of the constitutional issues by being more explicit where the federal government can tax, just what an excise is, where tied grants can be applied, and duplication of responsibilities (and services) at the federal and state level. Also limit the High Court's ability to decide it is their position to make the constitution a living and breathing document.

Additionally, since it is a federalist system, the states should be more involved, maybe something as simple as the states nominating judges for the high court. This may serve to have the High Court serve their interests rather than the Commonwealths.

Federalism is superior and important. It is being broken through the gaps in a poorly written constitution, an activist High Court and a power drunk federal government who is openly hostile to the states. The fixes are constitutional and political.

cam

This article introduces the Copernican paradigm. The Copernican Group advocates establishing an Australian republic by replacing the Queen with a popularly-elected Head of State. The Copernican Gazette (PDF) was published earlier in 2006 to convey the proposals of the group and they are looking for replies to publish.

This article is to introduce members of the South Sea Republic to the Copernican paradigm. The Copernican paradigm was discovered independently by five contributors to republican debate. The five agreed to collaborate and draw strength from their different backgrounds and interests.

The Copernican Group advocates establishing an Australian republic by replacing the Queen with a popularly-elected Head of State with ceremonial powers and a power to appoint and dismiss the Governor-General and state Governors with limited discretion.

Other proposals implicitly merge the roles of Governor-General and Head of State - a superfluous step which has served only to divide republicans into minimalist and direct-election camps. The Copernicans have found a better way, retaining proven constitutional checks and balances, while delivering true sovereignty to the people through their elected Head of State. A model that changes the least and offers the most is best model to put to the Australian people.

The name Copernican was chosen because of fundamental difference between this new approach and other proposals. The original Copernican paradigm overturned centuries of assumption and doctrine to allow us to observe the universe in a new and more realistic way. The Copernican Group believes that there are unconscious presumptions that have created an unresolvable three-cornered contest between monarchists, minimalist republicans and direct election advocates.

It is only in this incomplete view of our constitutional system would one assume a future republic must involve "the Queen and Governor-General replaced by a president". But that is exactly the formulation of both the 1999 referendum question and models that directly elect the Governor-General. Prof. John Power calls this the "merger assumption."

Sure, it may make intuitive sense to follow this formula. But that's exactly the mistake that ancient and medieval astronomers made when they put the Earth at the centre of the universe. Republican attempts to re-engineer the Governor-General into a president under Australian conditions must inevitably resolve a range of tangential issues, which make such a project unviable. The real objective is to make Australia independent of the Queen and so long as the focus remains on the Governor-General, that goal becomes evermore distant.

As Copernicus demonstrated conclusively, intuitive sense sometimes fails us. He challenged the age-old assumptions and took a new interpretation of the heavens beyond the imagination of his fellows. Likewise, republicans will find a solution when they move their technical focus from the Governor-General to the Queen. After all, the Queen is the fulcrum of the whole debate.

Copernicus did not postulate a more complex view of the universe but a simpler and more elegant one. For an Australian republic, this should be as simple as codifying the one actual duty left to the Queen - the appointment of the representative governor on the advice of the prime minister or premier. To complete the codification, the constitution would vest executive authority in the head of state, but reserve the actual exercise of power in the Governor-General or state governor as required. This would allow the relationship between the Governor-General and Prime Minister, including the exercise of reserve powers, to continue to be guided by unwritten convention.

Absent of real executive power, the new head of state may be directly elected and yet above politics. Separate from the business of government, they cannot implement policy and thus any electoral campaign cannot be based upon promises or establishing a mandate. The fear of a popular President taking power away from the parliament is completely dissipated when the Copernican Paradigm is applied.

The Copernican Group is not an advocate of just one model. Last year members of the South Sea Republic read of the Honorary President Model ( http://www.southsearepublic.org/story/2005/7/3/154653/3937 ). The other named models are The Sovereignty Model and The Egalitarian Model. There is a model involving Council of State and another where the States have an active role in defining the Presidency.

The Copernicans are not automatically opposed to codification, but the paradigm has the unique advantage over other direct-election models in that codification is unnecessary. This gives republicans options. The conventions can be maintained as non-judiciable, unwritten rules that can evolve to suit changing political circumstances. Alternatively, we can make a case for codification, not because we have to constrain Presidential power, but because we'd like to constrain governmental power. In other words, we codify when it makes sense to codify. This is a process that will and should continue over the centuries, rather than completed in one hit.

Critics of the Copernicans have said they understate the amount of constitutional change necessary to achieve a republic. It is interesting that in no particular instance has any model been shown to be deficient in that regard. In reply, it can be pointed out that the amount of constitutional change absolutely necessary has been overstated by republican advocates. This has given monarchists the political ammunition to recast reform as radical social policy and promote themselves as the defenders of the constitutional system.

The Copernican Paradigm is redefining the republican debate. Minimalist and conservative republicans now have a supportable direct-election option that they can support. Codification is no longer required for a directly-elected presidency. The focus of the debate is returning to the Queen and the role of an Australian Head of State. Each of these developments is good news for republicans. More importantly it is good news for Australia.

The Copernican Gazette was published this earlier in 2006 to convey the proposals of the group forward and put the paradigm in the hands of every parliamentarian in Australia, state and federal. For the next issue of the Gazette we are looking for letters to publish to encourage debate on the paradigm, to identify difficulties and extend the range of designs and concepts already available. Read a copy of the Gazette (issue 1) here: http://www-personal.usyd.edu.au/~dlatimer/archive/Gazette-Issue1-Final.pdf .

REFERENCES

Copernican Information Page http://www.copernican.info

The Copernican Constitution http://www.quadrant.org.au/php/archive_details_list.php?article_id=1125

Honorary President Model http://www-personal.usyd.edu.au/~dlatimer/honpres/

Egalitarian Republic Model http://7gs.com/republic.html

Submissions to the Senate Republican Inquiry
Peter Carden: http://www.aph.gov.au/Senate/committee/legcon_ctte/completed_inquiries/2002-04/republic03/submission s/sub105.doc
David O'Brien: http://www.aph.gov.au/Senate/committee/legcon_ctte/completed_inquiries/2002-04/republic03/submission s/sub126.doc
Prof John Power: http://www.aph.gov.au/Senate/committee/legcon_ctte/completed_inquiries/2002-04/republic03/submission s/sub28a.doc

Senator Russell Trood of Queensland made a speech on Regionalism in which he argues that the health of the federal system requires devolution to the local authorities closest, and most competent, to deliver the required governance to citizens.

Trood also suggests that devolution might require the establishment of more states in order to increase the local responsiveness. He also argues that clean boundaries of authority, responsibility and separation need to be defined but with an acknowledgement that the modern-state invariably is not composed of autonomous fiefdoms but overlapping and co-operating political areas. Trood also mentions that devolution is not just a rural concern but will bring greater benefits to city-dwellers too.

I agree with Trood. The on-going centralisation has become a structural weakness in our political system. The antidote is decentralisation, and as Trood argues devolution.

The entire speech is reproduced here;

A hundred years after Federation, Australia has an increasingly centralised system of government. The recent High Court decision in the Work Choices case was further confirmation of this reality, but the movement towards the centre has been evident for a very long period of time. The extent of this movement would have surprised some of the founding fathers.

They created a federal system to devolve power and to anchor democracy in a country which, even by the start of the 20th century, exhibited growing political, economic and social diversity.

Given the strong drift towards centralism, it is perhaps not surprising that it has attracted frequent and increasingly vociferous criticism. Nor is it surprising that a long list of other ills are supposed to afflict the federal compact, including the vertical fiscal imbalance between the states and the Commonwealth.

Without embracing the complaints of every critic, I share the belief of many that there is now a need for us to look seriously at the dysfunctional aspects of federalism and to think creatively about the way that we might address them. I am convinced that, when we do so, we will not reach an adequate resolution of the problems unless there is a strong dose of devolution or greater regionalism within the policy mix.

Tonight I wish to argue briefly a case for a new regionalism.

When the six existing colonies formed one indissoluble federal Commonwealth of states in 1901, there was every expectation that new states would be admitted to the federation. Indeed, were the founding fathers to return today, they would be astonished to find that after 100 years this has not occurred. The last time there was any significant change to the political geography of the country was in 1911, when the Northern Territory was hived off from South Australia. Certainly, it was not expected that my own state of Queensland would remain unchanged. When it became a colony in 1859, it had a population of just 23,000 people.

By the time of Federation the numbers had grown substantially and there was considerable anticipation that a new state would be created in North Queensland. It was this prospect that encouraged many in the north of the state to vote so strongly in support of the Federation referendum.

The expectations of the founding fathers have not been fulfilled, and the reality is that there is a low correlation between Australia's real-life urban and rural regions and the levels of government designed to serve them. Put another way, the geopolitical boundaries that divide the nation-- whether we talk about local government boundaries, state borders, the lines that mark out area consultative committees or even the myriad divisions created for the delivery of health, education and other government services--are often poorly aligned to the communities of interest they are designed to serve.

There is no necessary virtue in comprehensive regionalism and no ideal level of devolution for good governance. However, there is the well-established principle of subsidiarity. This principle holds that decisions should be taken, and responsibilities exercised, as close as possible to the citizens at the lowest level of competent authority. We have long given rhetorical support to this proposition but equally long disregarded it in practice.

In these circumstances it is perhaps not surprising that Australia's existing political geography is coming under increasing criticism from a wide range of perspectives. Local government representatives routinely contend that they are closest to the people but deprived of the power and the resources and increasingly subject to the burden of cost-shifting from other levels of government.

The states and territories complain constantly about fiscal centralisation, overlapping and duplicated functional responsibilities and, increasingly, federal policy control.

Nor is the Commonwealth satisfied with current arrangements. The states rightly earn blame for delaying and frustrating sensible Commonwealth reforms, for delinquency in failing to cut taxes under GST reforms, for a failure to spend on infrastructure development and for their tolerance of numerous regulatory inconsistencies that add massively to the costs of business, both local and international.

Finally in this litany of federal woes, it is useful to point out that the complaints and frustrations with current arrangements of federalism are not just confined to the three levels of government. In October 2006, the Business Council of Australia released a report which contended that overlap, duplication and cost-shifting between the Commonwealth and the states, unnecessary taxes and overspending on programs because of a lack of oversight and accountability cost Australians at least $9 billion a year, and perhaps as much as $20 billion a year, through higher taxes and poorer quality services.

It is not a natural instinct among politicians, especially at the federal level, to consider that part of the solution to the problem of federalism is to seek greater devolution. More often, greater centralisation is seen as a better response. For some, to contemplate the idea of more states, and perhaps expanded regionalism, as a solution to federalism is as near to a nightmare scenario as is possible. This view fails to take account of the potentially productive power of the regions that could be released if serious reforms were achieved.

It fails to acknowledge how political restructuring can help promote innovation and ensure economic sustainability in a globalised economy.

It fails to appreciate that increasingly in Australia governance is a shared activity between local, state and federal authorities and that reform and the achievement of prosperity involve not so much competition as cooperation and collaboration between these different levels of government.

The idea that each of Australia's levels of government are separate fiefdoms--autonomous in their decision making, separate in the management of their financial affairs, independent in the exercise of their responsibilities and in every other way removed from one another--is an old and thoroughly outdated view of the modern developed state.

Of course, there need to be clear divisions of political authority and also comprehensive understandings of roles and responsibilities, but these must exist within a much more sophisticated model of contemporary intergovernmental relations.

The model of enhanced regionalism that will work best for Australia is a matter for debate. We could pursue more states created from existing ones, stronger regions with more widely devolved powers created within states or, of course, the even more radical idea of abolishing the states altogether and moving to a two-tier system of governance with many regions. All are possibilities.

We can debate these options in due course. For the moment, we have a far greater challenge--that is, to imagine a new federal future around a stronger, more sustainable regionalism. Perhaps we should be concerned that the Australian people have no interest in such things. On this matter, I draw the Senate's attention to the Constitutional Values Survey in Queensland and New South Wales undertaken by researchers at Griffith University. They showed a remarkably high knowledge of the problems of federalism among the public and a willingness to embrace reform.

What, then, might be the possible benefits of a reformed system?

First, there could be a more effective political system with better economic representation and accountability. Second, it would offer more efficient and responsive public administration. Finally, it would be possible to see communities with higher levels of social, economic and environmental sustainability. In Australia, arguments for greater devolution within federalism are often seen as arguments designed to benefit Australians in rural areas.

This is a narrow prism through which to consider the arguments for change. Certainly, regional Australia could hope to be empowered through reform, but the shortcomings of federalism affect those in urban areas and certainly those in the rapidly growing sea change communities around our coast.

Regionalism is a program of reform for the whole country. I would be surprised if reform was to take place quickly, but the reality is that to date our efforts at federalism reform have been half hearted and our interest in regionalism pursued without a serious commitment to the value of devolution.

In a globalised world, where the challenges of maintaining economic prosperity, the integrity of our liberal democracy and a high measure of social cohesion are constantly before us, we can do so much better.

The Parliamentary Library has a research brief on, The politics of the Australian federal system [pdf] . It is fairly detailed and covers the issues and concerns over federalism in Australia and its wandering from the original intent.

One of the interesting sections is the dominance of the commonwealth in financial matters. Scott Bennett writes;

A great many of the changes in Australian federalism have flowed from the failure of the Finance clauses (Chapter IV) of the Constitution to avoid the increasing centralisation of financial power.

Within a few years of Federation, the Commonwealth was finding the financial arrangements irksome, due to the need to make unexpectedly large expenditures of its own in such areas as defence, public works and social services. It was therefore soon working to undermine the government finance guarantees.

The states were powerless to resist.

As early as 1902 the Commonwealth Attorney-General, Alfred Deakin, had made his oft-quoted claim that the states were "legally free, but financially bound to the chariot wheels of Central Government".

By the end of the first decade, when sections 87 (payment of customs and excise takings to the states) and 94 (distribution of surplus Commonwealth funds to the states) had been allowed to fall into disuse, the pattern of Commonwealth financial dominance and relative state penury had been established.

The surprising thing is how quickly the Commonwealth took over.

Commonwealth and state governments soon came to see there was a need to deal with the collapse of the constitutional financial arrangements. A constitutional means was at hand in the form of s. 96:

... the Parliament may grant financial assistance to any state on such terms and conditions as the Parliament thinks fit.

A last-minute addition to the Constitution, the section was believed to have been inserted only for use in times of financial emergency.

A major step in 1910 was for the Commonwealth to begin using s. 96 to make annual `topping up' payments to each state to help them deliver services to their populations. Despite this, Western Australia and Tasmania were still unable to cope, and within two years extra payments were being made to these states.

Not surprisingly, all states were soon depending upon s. 96 grants to help them meet their financial needs, a dependency that has, in fact, increased in the years since. By 1928 the Commonwealth had also forced the states to accept the newly-created Loan Council, which henceforth controlled all government borrowings, both Commonwealth and state. Each of these two developments further undermined the constitutional provisions.

The Grant Commission came soon after in 1933 which was when grants became tied to outcomes rather than just being general purpose. Though tied grants appeared as early as 1923 in relation to main roads. Section 96 has acted as the floodgates for Commonwealth dominance of state finances.

Scott Bennett mentions [pdf] that all federal governments conducted their affairs with a self-interest, however, two governments have pushed hardest against the states - Whitlam and Howard.

Bennett quotes Whitlam as saying;

There are few functions which the state Parliaments now perform which would not be better performed by the Australian Parliament or by regional councils. The states are too large to deal with local matters and too small and weak to deal with national ones.

Howard remarked on radio ;

If we were starting Australia all over again, I wouldn't support having the existing state structure," he said. "I would actually support having a national government, and perhaps a series of regional governments having the power of, say, the Brisbane City Council (Australia's most powerful local government). But we're not starting Australia all over again, and the idea of abolishing state governments is unrealistic.

John Quiggin has also noted the similarities in Howard and Whitlam's approach to government .

Bennett writes:

[This] has seen the Howard Government making decisions well outside the range of powers granted by the Constitution and much in excess of previous Commonwealth governments of all types.

There have been two main avenues by which the Government has attempted to achieve its ends.

On the one hand, the Howard Government has mirrored aspects of the Whitlam years by linking funding proposals to the imposition of particular policy aims. Queensland and Western Australia accepting three-year funding agreements for their Technical and Further Education (TAFE) systems with the proviso that TAFE staff would be offered Australian Workplace Agreements, is just such an example. ...

The second means has been a consequence of the size of the Commonwealth surplus during its period of office. This has enabled the Commonwealth to make financial grants that effectively bypass the state and territory governments. Payments made directly to local governments for programmes such as the Roads to Recovery are typical.

Examples referred to in the 2004 Commonwealth election included the provision of tool boxes for apprentices and the establishment of technical secondary colleges; rather more narrowly focused cases included the building of a bridge in the Queensland electorate of Petrie, or the dredging of Tumbi Creek in New South Wales.

Bennett also notes that there is little defence of federalism in Labor. For that matter any of the major parties at the federal level. In the last election both the Greens and Democrats had policy platforms of dissolving state government. The level of centrism may vary from government to government, but they are all for unitary national government concentrating power in Canberra.

cam

In the "Great Mistakes of Australian History" Clive Moore tackles the problem of federation and its choice in 1901. Moore argues that the constitutional process in the 19thC failed to engage with the Pacific and Asia, as well as made the constitution impervious to change. His final point is that political expediency and compromise between the colonies to get them to agree to federation has meant that the colonial boundaries are for ever cast in stone as states.

The first point was probably not socially possible. The 19thC had 'scientifically' convinced itself of the superiority of the white and Briton race. The fortress mentality that led to the White Australia policy was agreed upon by all sides of Australian politics.

It is an immoral chapter in Australian governmental and administrative history but was popular enough that it could not have been stopped. It was not a result of the constitution, as another article in the book notes, Darwin was setup to be a multi-ethnic Hong Kongese style trading centre, but hardening racial opinion never enabled it to achieve that in the late 19thC and early 20thC.

The other persistent myth, which Felix challenged, and has now been empirically determined to be false, is that the Australian Constitution is hard to change. The referendum is structured in a way to satisfy both the national and federal character. For instance:

• Majority in Senate - federal character
• Majority in House - national character
• Majority of popular vote - national character
• Majority of states (ie majority of popular vote in a majority of states) - federal character

This is a federation design choice. The majority of states may seem like an extra step too many, and I think it is, however, despite Australia's small number of states, it has not affected an outcome of a referendum. If a referendum has passed the popular vote, in all cases that I can recall it has all passed the state majority as well.

The high failure rate of Australian referendums has been because of the large number of referndums put forward that were for the increase of Commonwealth power. When the referendums are divided in this manner it becomes obvious that Australian voters were rejecting centralisation.

Moore notes that Canberra has found different ways to get around this:

This has been partially overcome by the occasional (though rare) successful referenda, and the use of the High Court to extend the federal government powers in a way never contemplated by the authors of the Constitution.

The latter is a significant issue. As can be seen by the following chart, the referendums for centralisation dropped off in volume in the second half of the twentieth century as the High Court's decisions and support for centralisation in Canberra has made referendums less necessary for Canberra to achieve the power it wants.

Moore's third complaint, that the states are forever fixed in geopolitical shape by the constitution is a good one. The value of a constitution is that it provides inter-generational stability and certainty of government. It removes the disruption of coups, violence for political power, or warfare between competing political domestic powers. The downside is that it is inherently inflexible by design.

This raises questions of balancing stability and fluidity. Normally when we talk of these areas we consider the stable technology to be constitutionalism while fluidity is provided by statutory legislation.

It is hard to give a national government statutory control over the States as complete centralisation would be a quick process rather than one that has been eroded over a century. The State control over Local Government carries similar pitfalls.

Yet if we look at Local Government it has remained fairly volatile as to its borders as administrative growth demands. For instance the Brisbane City Council and Penrith City Council were both created by the coalesence of several smaller municipal councils. I don't think anyone would doubt that the growing administrative challenges of those two cities made those amalgamations wide.

They are examples of a centralisation process. Not unlike the Federal Government's encroachment into the States. One of the purposes of Federation is to have powerful decentralised political entities that can rival the national government for power. This keeps overt centralisation, and the propensity for central tyranny and inefficiency in check.

Moore writes:

I am not advocating abolishing the states, having one national government and preserving all of the several hundred (629) local government units.

However, there are clearly regions within Australia that would work well as provincial government units. To name just a few: Wimmera, the Pilbara, Western NSW, New England (a referendum on the New England statehood was narrowly defeated in 1967), Queensland's South-East corner, the Darling Downs, the Cental Queensland coal-basin and Cape York would all function much better under their own regional governments.

In this area Moore is arguing for what Russell Trood called 'regionalism' in his Senate speech. This is a devolution of the states as administrative areas while maintaining their constitutional status in the federal constitution as states.

This minor form of devolution would still leave fairly powerful state bodies. Moore notes that the Brisbane City Council [BCC] has a similar budget to Tasmania and it is implied in Moore's article that he sees the provinces in being something of the BCC's size. He concludes with:

The ideal new government system would have a national government and around 30 provinces, designed for efficient regional operation, with a constitution capable of beind amended as circumstances change.

Moore's idea is not new either. The Prime Minister, John Howard, has remarked on radio:

"If we were starting Australia all over again, I wouldn't support having the existing state structure," he said. "I would actually support having a national government, and perhaps a series of regional governments having the power of, say, the Brisbane City Council.

"But we're not starting Australia all over again, and the idea of abolishing state governments is unrealistic."

Again the BCC is popping up, but it is the exception in Australia and it coincides with the seat of Queensland power - state parliament is in Brisbane as well. The main problems between the national and state governments are fiscal. Namely the vertical fiscal imbalance. This has been used to leverage all manner of control over the states, from the tied grants to the GST, the state's have had their independent fiscal footing removed from them.

John Gorton's and Gough Whitlam's view of federation was that the federal government made policy, funded that policy and the states existed as regional administrative units for the disbursement of federal funds in support of federal policy. This removes all capability of regional or provincial policy making from the states.

So the problem goes far deeper than the geographic boundaries of the states. Whenever these issues are discussed the problem becomes centralisation and Canberra's rapacious desire to be unitary rather than federal.

Incession and secession are already possible in the Australian constitution. The Northern Territory has had a referendum on statehood, while Western Australia has already seceded once and as Moore noted New England in NSW nearly has too. These vehicles exist but have either not been acted upon or not been successful.

The BCC sized provinces are largely national dreaming for a more controllable systems of states from Canberra's point of view. One of the problems with the increasing centralisation is that even the very powerful states, such as NSW and Western Australia, are unable to stop the encroachment of federal government.

In such an environment it makes sense for the subsidiary units to be bigger in order to stand against the larger entity. If the present large states such as NSW and Western Australia were to break up into smaller provinces, the federal government would dominate them politically in short order. We would have a unitary system of government very quickly.

It may be that in our present environment of increasing national power that a couple of the states need to join in order to become stronger against the central entity - maybe NSW and Victoria need to amalgamate in order to stave off federal encroachment. Maybe Tasmania and Victoria need to create a super-state?

I can see where there needs to be incession and devolution of the present state system for administrative purposes, but in the current environment of rampant centralisation, I fail to see how it makes sense. The mechanisms to incede and secede already exist but have only been acted upon in rare cases. As it is they need to be done under the legitimacy of the popular will anyway.

I don't consider the choice of federalism as the guiding a technology an error, nor do I consider the current geo-political boundaries of the states a historical error though I do recognise the fluidity from incession and secession as important for the political and administrative challenges facing regions.

cam

History has a sine-like wave between the extremes of capital intensiveness and commodification. One of the best examples of this is warfare which was capital intensive with the Knights in shining armour before quickly becoming commoditised by gunpowder - which any riff raff could load and aim. The nation-state as an organisational technology proved well suited to the capital and state intensive period of the late 19th and early 20thC. However, now we are in a commoditisation swing and need to re-seek out decentralisation structures.

A great organisational technology is federalism. It strikes an excellent political balance between centralisation and decentralisation. Another benefit is that it places the central authority in permanent tension with the out-lying arms, and hopefully, through a well written constitution, that tension is maintained such that neither centralisation or decentralisation dominate absolutely.

Sadly that didn't happen in Australia and between Canberra, the federal political parties and the High Court - nationalism is now dominating the states such that decentralised autonomy is in sad shape. Other than the benefits of federalism offering an internal free-trade system, which was important to NSW who had tariffs leveraged against them by the protectionist states such as Victoria, South Australia, Western Australia and Queensland (also Tasmania - in fact NSW was the only free trade state), the national dominance did not bring the capital intensive benefits either.

During the late 19thC and mid 20thC warfare and the state got capital heavy. Blue water projection was first dominated by the Dreadnoughts and then super-carriers. All massive capital works to create and maintain. Only nation-states with their large wealthy populations and efficient (by history standards) tax collecting bureaucracies can afford that kind of thing.

Then we got the welfare state after the depression where governments decided that capital intensive methodology to provide public services. But in Australia most of this was done by the states. For instance education, health etc are the domain of the states. So basically the federal government in Australia centralised the power over policy and money collection but not the actual services.

This is exactly how John Gorton and Gough Whitlam visualised the federalist structure with the policy and receipts dominated by the feds and the administration and disbursement of receipts dominated by the states.

Unfortunately we are in a commoditisation cycle. Mainly because Deming's statistical process control [SPC] made the geographical location of a factory irrelevant, allowing companies to take advantage of decreasing wages without a loss of product quality, and the productivity gains from digitisation. Communications, production, bureaucracy, etc, etc have all been transformed by the microchip.

I was recently at the Udvar-Hazy Center looking at the Enola Gay from a raised platform when I said to myself, "It is so analog!". This is the aircraft which dropped the atomic bomb, yet its cockpit was populated by dial after dial. Not a HUD, CRT or LCD in sight (my car has a HUD). I would not have considered an analog engineering solution like that unusual fifteen years ago - today - I am shocked that people existed with backward technology like that!

I was interested to read Rod Beckstrom's take on federalism :

Q: You say that when our founding fathers sculpted our [USA] Constitution, they put the government in the "sweet spot," between centralized and decentralized. Are we still there?

RB: We've [USA] drifted strongly back toward centralization over time as a country, and of course we wobble back and forth a little bit. One of the biggest examples was after 9/11, when we took all the different police forces and intelligence forces and put them all under Homeland Security. That was a major centralization move, and typical: When a fairly centralized player gets attacked by a decentralized force, like al-Qaeda, the first reaction is to centralize further, and that's usually a strategic mistake.

When asked with what the prescription to the increasing centralisation is, Beckstrom replies:

Q: So how do we get back into the sweet spot?

RB: One way is to push responsibility back to the state governments. In some areas you can decentralize by outsourcing services further. One of the ultimate moves in terms of combating terrorism is to have the government use more Special Operations forces, which tend to be more decentralized, working in small teams that in general are given a high level of autonomy. . . . I gave a presentation at Stanford in 2004 to 50 CEOs from around the world. One CEO took it back to a head of state in a Middle Eastern country to the top levels of government. Based on it they decided to start their own local special operations in a selected city, and found it to be much more effective than their traditional, centralized counter-terrorism operation - at a very small fraction of the cost.

The people living in any community have the best sense of what is really going on in that community. They have local intelligence. The best information is at the edge of a network . . . where people are bringing what they want into the network and taking out what they want, without any centralized control.

It is interesting to see Beckstrom mentioning out-sourcing as a decentralised response though he later adds a caveat that checks and balances and monitoring are essential for that kind of decentralisation.

Our current period of commodification has meant that formerly capital intensive weapon systems are now within the reach of wealthy individuals and groups. For instance a satellite goes for under $20 million these days. Cheap enough for many people and organisations on the planet to afford.

A recent development has been super-yachts that have anti-submarine defence systems and air-to-air armaments. Yet recently a pirate ship fired on a Luxury Liner with an RPG (rocket propelled grenade) which caused consternation with media attention. Another commodity weapon system is the UAV. Rather than $100 million USD on a JSF, an Australian groups of aerospace engineers flew a cheap home-made UAV across the Atlantic, through rain squalls, and landed it on its target for less than a few kilograms in fuel. This is a very cheap, efficient and accurate warhead delivery system.

The final problem with centralisation and capital intensive endeavour is the structures that are required to support them. These becomes points of weakness or failure which can be attacked. John Robb calls this system disruption . A good example of a capital intensive system, operating under political regulation, that is vulnerable in this way is energy delivery .

Australia has under-gone a century of transformation such that modern federalism is not much like the federalism of Samuel Griffiths. There is an argument that the Griffith view of federalism was too restrictive on national autonomy, but over the last century the centralisation has been too great - such that it is a structural weakness in the modern commoditised environment. The states need to decentralise federalism by asserting their own autonomy and diversity.

Canberra likes to talk about the 'national interest'. We are at the point in the commodification cycle that the national interest includes a devolution to state autonomy for the purpose of political strength.

cam

Mark Bahnisch has an excellent article on federalism and public policy . Competing policies inevitably mean differing outcomes but this is the value of a decentralised system - which federalism is. It increases the number of outcomes, but reduces the risk of unitary failure at the same time.

From the article:

What of course that suggests is that it's highly unlikely that these differences have short term causes such as labour market factors or the resources boom, ... it also suggests the blindingly obvious - that Qld and WA probably have put more effort over a longer period of time in public policy and managerial terms to building up efficient and flexible VET systems. Which of course is something that happens under federalism.

and:

Meanwhile some of the states are doing the hard yards in tackling a very complex policy area for which they're actually responsible. But they don't get the headlines.