Click here for PDF version
Review by Gregory Melleuish

The Enlightenment and the Origins of European Australia
John Gascoigne
Cambridge University Press, 2002, 233pp, $69.95, ISBN 0521803438

JOHN GascoigneÕs The Enlightenment and the Origins of European Australia demonstrates that the Enlightenment and its values of reason and progress were a significant factor in the formative period of Australian history. The Enlightenment helped to shape the contours of Australian culture. When the First Fleet arrived in Australia in 1788 the Enlightenment was no longer an avant-garde or radical movement but had begun to permeate the values of European civilisation. The Enlightenment brought to Australia was not the anti-religious and often destructive variety that fed into the radicalism of the French Revolution but the moderate Enlightenment of lowland Scotland and England. From the Scottish Enlightenment came the science of man as expressed in the economics of Adam Smith, the sociology of Adam Ferguson and the philosophy and history of David Hume. From the English Enlightenment came an interest in the natural world and the desire to shape and improve that world.

This Enlightenment moulded the way the early European settlers in Australia saw themselves and their world. Gascoigne argues, correctly I think, that they had a minimal sense of their environment in Australia as being imbued with any sense of the sacred. For them it was a Ôterra nulliusÕ waiting to be made through their efforts. Hence Gascoigne identifies ÔimprovementÕ as one of the key words in their vocabulary: the new Australian world was there to be understood and improved. It was to be classified, analysed and then made bountiful. This was not necessarily a secular view: Australia could be understood as GodÕs handiwork to which they had been sent to improve and to make into a better place.

This ideal of improvement brought them into inevitable conflict with the indigenous inhabitants of the continent. The European settlers made an assumption that once the Aboriginal inhabitants were shown the benefits of progress and civilisation they would adopt them as a matter of course. This did not happen and the fact that it did not remained a source of deep puzzlement for the British. Their Enlightenment values told them that they should be able to ÔeducateÕ the natives and turn them into civilised beings. The reality was that they often had no great desire to be ÔcivilisedÕ in this way.

Australian nature with its weird plants and animals was a challenge to the Enlightenment values of the British but they were able to classify it and ultimately to fit it into their scheme of things. Their attempts to use the same Enlightenment values to understand the original people of Australia were much less successful. They acknowledged the shared universal nature of all human beings and attempted to explain differences through the idea that human beings passed through an evolutionary process: from hunter/gatherer to pastoralist to agriculturalist to commercial society. Why then did men on a lower stage of development not immediately seek the benefits of a higher stage of development? Gascoigne captures the nature of this dilemma beautifully and to my mind it is the highlight of the book.

It is worth recalling, however, that the Enlightenment is only one part of the cultural inheritance of Australia. Nineteenth century Catholicism, for example, took an entirely different view of the Enlightenment. The Catholic FreemanÕs Journal praised the Middle Ages and carried the flag for protection and what it termed Ôfair tradeÕ. Also the colonists often appealed to traditionalism as expressed in their Britishness. In politics the image of the British Constitution and the rights of free-born Englishmen remained very potent.

Finally there was Romanticism, the reaction against the rationality of the Enlightenment that emphasised feeling. Gascoigne rightly argues that Romanticism had a hard time in Australia because of the lack of both a sacred landscape and an organic past with which the present could be contrasted. This does not mean that Romanticism in Australia was absent, rather it took another form. Just as the representatives of Enlightenment in Australia were often Scottish, so it was a Scot, Nicol Stenhouse, who was most influential in introducing Romantic ideas into this country. Stenhouse came from a Tory background and had been involved with Thomas de Quincey, of opium fame, before coming to Sydney. The Stenhouse circle in the 1840s and 1850s developed a Romanticism of alienation built on writers such as de Quincey and Edgar Allen Poe. It was a Romanticism that found expression in the poetry of Henry Kendall and was later to emerge in the work of Christopher Brennan and his disciples down to the early James McAuley.

The other problem with placing too much emphasis on the influence of the Enlightenment in Australia is that while the Enlightenment emphasises rationality Australian culture has a very powerful streak of what is has been described by George Shaw as Ôsentimental humanismÕ. Feeling rather than reason is often the dominant factor in debates about public matters. There is a sentimental attachment to such things as inefficient universities, trade unions, Telstra and other archaic practices that defies commonsense and reason. The interesting question relates to the origins of this sentimental humanism. Did it develop because of the failure of Enlightenment values in the second half of the 19th century?

There is a division between rationality and feeling within Australian culture: on the one side there is science, law and economics and on the other the arts, moral self-righteousness and emotion. This division that has become greater in recent years as areas that previously favoured rationality, such as history, have increasingly succumbed to basing their approach on feelings of moral outrage. This is fortunately not true of this book. It is urbane, well written and, most importantly, increases our knowledge of the topic. It is highly recommended for anyone seeking to understand seriously Australian culture.

The Voluntary City
David T. Beito, Peter Gordon and Alexander Tabarrok (eds)
Ann Arbor, University of Michigan Press, and Oakland, The Independent Institute, 2002, 480pp, US$24.95, ISBN 0472088378

THIS IS A first-rate book. IÕd strongly commend it to anyone who reads Policy, and especially to those who donÕt but ought to. It would make an excellent gift for any student. It is also an important book. This is because it is subversive of some ideas that we tend to take for granted, but which this book shows to be incorrect.

What is the book about? Essentially, the non-governmental provision of all kinds of services that we make use of in an urban context, and which we typically assume that government has to provide. The book is a sampler of historically or empirically based studies of non-governmental provision, commercial and non-commercial. It discusses planning, urban infrastructure, roads, law and justice, police, health insurance and medical care, and education, and also private community associations. These latter bodies play a quasi-governmental role in the provision of services relating to housing to some 47 million Americans, typically by way of administering, privately, the common space in, and the furnishing of regulations for, condominiums and suburban residential developments.

Why is the book interesting? Largely because of the different, detailed stories that are told. Rather than trying to tell you these, let me pose some of the questions that they address. How could infrastructure be furnished to a rapidly expanding area, without government doing it? How might the private provision of infrastructure function in an urban setting? How could turnpikes be constructed privatelyÑand even in conditions when those involved did not expect them to make a profit? Could the infrastructure needed for a manufacturing district be furnished privately? How could law and courts be provided, if not by government? How could one have the effective prosecution of criminals, if there were no police? How could welfare and medical services for the poor be provided, if the state did not do it? And surely, if government were not involved in education, a smaller percentage of children would be in school than they are today. If you read Policy, it is possible that you might be able to guess the overall answers to these questions. ButÑand this is the power of the bookÑyou would not, I suspect, even be able to imagine the specific ways in which some of these things took place. The fact that the book consists of short pieces by a variety of authors also makes for lively reading.

In addition, the book not only documents the current role played in the US by private community associations, discusses their constitutions as useful objects for academic study, and considers how they might be extended to current urban areas, but also offers some criticism of them. The author of the criticismÑin my view understand-ablyÑwould prefer arrangements under which companies continue to own and run residential areas (much as they do shopping malls), but which are currently discriminated against by U.S. government policy.

What might one gain from reading this book? First, an expansion of oneÕs imagination. Through reading it, one may discover that presumptions that one had made about how services have to be provided, and for the need for government to be involved, are shattered. What is more, one discovers the way in which all kinds of needs were catered for, and in many different ways. The contrast with our current approachesÑwhich assume that a few people in government know both what we need and how it is best providedÑcould not be more stark. Yet these same assumptions also infect current forms of privatisation and contracting out, under which the same few people again get to decide what is needed and in many respects how it is to be providedÑand create incentives for rent-seeking and corruption, to boot.

Second, one might feel a certain sense of outrage or just wrath. For the very flowering of the imagination and the possibilities for learning by trial and error that these essays reveal, are also typically cut back by government. Experimentation in private provision is often shackled by unnecessary regulation. Further, those who might pay for private provision typically have to pay for government services, too. It is not unreasonable that the more wealthy might be asked to assist those who canÕt provide for themselves at all. But to compel people to pay for services that they will not use because they are providing privately for themselves is not only unfair but also limits the range of ideas that will be tried out, and the range of needs that are met. These essays also contain some striking arguments for the greater efficiency of private provision. Third, the book brings home the extent to which our current work in the universities is often statist in its assumptions. As Boudreaux and Holcombe suggest, it is striking that, if economists and political philosophers consider contractarian political theory, what they study are typically either the constitutions of states, or ideas that they make up for themselvesÑrather than, say, the rules of the 230,000 private community associations that currently exist in the US. Bright philosophers and economists may have some good ideas. But consider what might be learned if their more abstract speculative ideas were stimulated by a knowledge of the plethora of different arrangements that have actually flourished. There is much else here that may also give the scholar food for thoughtÑfor example, David Green argues that the private provision of health services through friendly societies served to promote good character (which classical liberals are often accused of simply taking for granted), and did so by appealing not just to self-interest.

All told, this is the kind of book that canÑand shouldÑopen peopleÕs minds, both through its contents and also through the vast range of material to which it refers. It should be bought and read not only because it is interesting, but also because it may help to free us from some key unconscious assumptions. If there is a problem, we all too often expect that it is the state that must resolve it. All too often we also assume that there is only one way in which this can legitimately be done. This book, while American, is sorely needed in Australia. For what other federal system has such an abhorrence of diversity? And what other Western country has such an expectation that the government will take care of usÑand in our case, amazingly, despite what we actually know about our politicians and public servants.

Review by Andrew Norton

Does Education Matter? Myths About Education and Economic Growth
Alison Wolf
London, Penguin Books, 2002, 332pp, $25, ISBN 0140286608

IN 1988 John Dawkins, then Education Minister, released a statement on higher education that set universities on the policy path they are still, with a few variations, following today. The economy was one of the statementÕs main priorities. Expanding the number of students would help foster the Ôconceptual, creative and technical skillÕ needed for Australia to grow and compete successfully in world markets.

Over the next five years, the number of Australian university students increased by a third, and they kept growing until the late 1990s, when numbers stabilised at around 600,000. Over the same time, in keeping with DawkinsÕ hopes, the Australian economyÕs growth rate improved and exports increased. If Alison WolfÕs provocative new book Does Education Matter? is right, the relationship between expanded vocational and higher education and an expanded economy was as much coincidence as causation.

Wolf does not deny that higher education and economic growth are linked. Many skills essential to a modern economy are largely or exclusively taught by universities. Graduates usually possess higher literacy, numeracy and other generic skills than non-graduates, though innate ability, schools, and family background all contribute as well as university education. On average, higher generic skill levels lead to increased income, suggesting that employers recognise high skill workersÕ added productivity.

Some university-educated workers are essential to growth in modern economies. WolfÕs question is whether offering university education to larger and larger numbers of people leads to commensurate growth. Her answer is no, or at least that there is no strong evidence that it does.

The basic reason for this is fairly simple. For graduates to have skills is one thing, but for there to be productive uses for those skills is another. Many poor countries, for example, have greatly increased their populationÕs education levels, but remained poor because their economies donÕt generate jobs requiring much education. The problem is so severe that the World Bank found a negative correlation between education and growth in developing countries.

Even in more developed countries, with good growth in jobs normally requiring university education, there are limits to how many tertiary qualified workers the labour market can absorb, and still strong demand for low skill workers, particularly in the service industries. In Australia, for example, 15-20% of graduates work in jobs that do not require tertiary qualifications, and there have been recent labour market shortages in only a small number of fields. From an economic point of view, educating people at university for jobs that require no more than school education is a waste, and governments around the worldÕs Ôeducation, education, educationÕ policies have been mistakes.

Perhaps hoping to avoid further controversy, Wolf largely avoids the issue of academic potential. Anecdotal evidence suggests that many students arrive at university very ill-prepared for its challenges. Even at universities requiring high Year 12 scores for entry, teaching staff find students struggling with grammar and spelling. Perhaps universities can add value to these students, but it is simply implausible to believe that they have anywhere near the potential of more intelligent and university-ready students.

Despite these problems, as Wolf points out, it still makes sense for those who would not have gone to university in the past to try to do so now. In the 1950s, for example, the number of people with degrees was very small. Employers hoping to find intelligent and capable staff, though not necessarily people with a specific vocational skill, knew that they could not restrict their recruitment to people with degrees, since most of the people who were intelligent and capable did not have one. As university education became more widespread, though, a much larger proportion of the intelligent and capable came to possess a degree. A degree became a proxy for certain skills and attributes, and was used by employers as a so-called screening device.

For young people today, hoping for high skill white collar work, not having a degree makes life much more difficult. Even if they could do the job without going to university first, unless they do go to university they are unlikely ever to get the chance to prove themselves. Their degree may not give them any skills they need, but it does get them an interview.

What of the graduates who end up in low skill work? Perhaps they are disappointed with their jobs, but at least they are not unemployed. Despite the surge of graduates into the Australian labour market since the early 1990s, unemployment among people with degrees in 2001 was only 2.8% lower than in 1989, when it was 3.5%. Graduates in low skill jobs are displacing workers with lesser qualifications, so they are of no added value to the economy. Their degrees are insurance policies, not productive assets.

Wolf argues that BritainÕs higher education system (and AustraliaÕs is no different for the purposes of her argument) may actually produce less skilled graduates than it did in the past. Growth in numbers was funded partly by cutting spending per student. For those headed to low skill jobs it does not, of course, make any sense to spend large sums. But the students headed to the high skill occupations traditionally filled by graduates now have less time spent on them by academic staff than previous generations of students. Wolf does not explore the literature on learning, but it supports her contention that, other things being equal, high student to staff ratios will adversely affect learning. By triggering a decline in learning, expanded higher education may even reduce economic performance.

While governments give economic reasons for education spending, the economy is never the only justification. DawkinsÕ expansionist reforms were as much about what his policy statement described as ÔequityÕ as they were about economic performance, about trying to widen university attendance beyond its middle class base. In that, at least, the reforms enjoyed some success. While the social composition of universities hasnÕt changed much, because middle class attendance has also been on the rise, many more working class people go to university now than before DawkinsÕ reforms.

Any attempt, on economic grounds, to cut numbers would inevitably strike hardest students from lower socioeconomic backgrounds, because they do less well at school, and have the least career potential. Wolf suggests money spent on getting low income people into jobs would be a better investment than more spent on education. Maybe this is true for early school leavers. I doubt it is so for those going on to finish school. People with degrees are taking jobs traditionally taken by the school leaver working and lower middle classes. To keep them in the employment race these people need access to university. More higher education may not matter much to medium term economic growth, but it does matter to social mobility.

Despite her great scepticism about the benefits of expanding higher education, Wolf doesnÕt actually suggest winding it back. It has already triggered too much change in employer behaviour and individual aspirations for that. Unfortunately, she has little on what we should do next, though we can draw at least two conclusions from her analysis.

The first is that we should be more critical of plans to push further expansion, such as the Blair governmentÕs target of 50% university education in Britain, and the Australian Vice-ChancellorsÕ CommitteeÕs figure-plucked-out-of-the-air goal of 60% attendance by 2020 in Australia. The second is that central planning of education cannot work. While her examples are British, her descriptions of why central planning failed there could, with a few names, dates and places changed, easily be the story of Australia as well. Central planners simply cannot collect all the information needed to run an education system, and cannot use the information they do have effectively.

The subtitle to this book Ômyths about education and economic growthÕ is important, because education still does very much matter for individuals and, at the higher end of achievement, for the economy. It is a significant reminder, though, that just because some is good it does not mean that more is better.

The Global Market for Higher Education: Sustainable Competitive Strategies for the New Millennium
Tim Mazzarol and Geoffrey Norman Soutar
Edward Elgar, 2002, 144pp, $US65, ISBN 1840 6439 23

PRACTISE WHAT you preach. That old adage seems to have been lost on Australian universities and the many marketing and management experts they employ. Despite the Australian higher education sector having emerged in less than two decades as one of AustraliaÕs largest and most promising export sectors, scholars of business have given their own sector little attention. Dr Tim Mazzarol and Professor Geoffrey Norman Soutar, of the Graduate School of Management at the University of Western Australia have set out over the last decade to change that and the fruits of their extensive research are brought together in the recent book The Global Market for Higher Education: Sustainable Competitive Strategies for the New Millennium. While the reference to the new millennium in the new title is perhaps a fad too far, the book offers many insights into the managerial challenges presented to universities by increasing dependence on international students.

Despite the bookÕs title, it provides only a concise although valuable summary of the significant growth in students studying abroad in the post-war period and the underlying push and pull factors. The authors focus instead on the second part of the bookÕs titleÑon the development of sustainable competitive strategies at the institutional, typically university, level. Mazzarol and Soutar confront directly the lingering squeamishness in academia about discussing universities as services enterprises. They mine the services marketing and international business academic literatures for concepts and insights that may illuminate the marketing and managerial challenges universities confront in their increasing reliance on international student revenues. The authors also offer many valuable anecdotes and findings from interviews with university managers for those new to university marketing. It is refreshing to see such work and one hopes that the book will find a wide readership in higher education management circles.

For that reason it is a little disappointing that throughout the book the discussion moves from general management and services marketing literature to the specific case of higher education. The authors seem to have been rather undecided as to who their audience would be. The book might have been better organised explicitly around key managerial challenges confronted by universities, rather than a conceptual framework developed from Michael PorterÕs notion of the five forces for competitive advantage. In style it is therefore more accessible to their academic colleagues than to university managers and in places reads like an academic conference paper. Incidentally, academic readers well versed in the challenges of internationalisation may feel at times that the authors bring interesting concepts to the case of higher education but then donÕt pursue their full potential. This is to be excused in such a pioneering analysis. It stands as a valuable open invitation to engage in the important task of rigorously conceptualising the internationalisation of universities.

There is much empirical research and reporting of key data still to be done. Mazzarol and SoutarÕs book, for instance, could valuably have incorporated a more detailed profile of the kinds of higher education institutions and programmes in various countries that have been most ÔsuccessfulÕ in attracting full-fee paying international students. The absence of such analysis reflects the main limitation of Mazzarol and SoutarÕs work to date. It relies heavily on surveys of university managers with responsibility for international marketing; not only for data on the strategies adopted but also for measures of market and industry structures and of institutional success and failure. This raises a concern that respondents may interpret the nature of the global market for education services and their own institutionÕs strengths and weaknesses in self-legitimating ways. However, their findings are generated through the application of rigorous statistical analysis techniques; although details of survey instruments and methodologies are sparse in the book. Mazzarol and SoutarÕs strongest finding might yet be that the university marketers they surveyed have internalised a coherent ÔPorter-esqueÕ account of why their strategies have been, for the most part, optimal. Truly independent measures of market and industry structures are needed to strengthen the research findings. Only that way will it be possible to gauge the quality of Australian university marketing.

The small number of survey respondents with doctorates in Mazzarol and SoutarÕs main survey might suggest that non-academic staff in international marketing roles predominated. A somewhat puzzling result of their empirical research might make more sense if that fact is taken into consideration. Mazzarol and Soutar found that, contrary to what much of the academic marketing and management literature suggests, positive endowments of Ôpeople and cultureÕ were negatively correlated with respondentsÕ perceptions of their institutionÕs success. The authors suggested, not without some foundation, that institutions with Ô . . . the strongest culture, the highest market profile and reputation are also frequently among the lowest in terms of commercialisation or market focusÕ. Assuming that the result is not merely an artefact of the survey design, it raises many questions.

Good universities still need marketing but their marketing staff might have less discretion and get less credit. They, in turn, might be inclined in surveys to stress those elements in the marketing mix over which they have control as being fundamental to the institutionÕs successes. One of the greatest challenges faced by universities is to foster the coordination of marketing and the development and delivery of academic programmes. Mazzarol and Soutar note the importance of Ôinternal marketingÕ but more academic attention needs to be given to a key issue arising between individual academics and management responsible for international marketingÑquality.

While the Ôdefence of academic standardsÕ can sometimes be nothing more than the defence of existing poor practice, many academics fear that a short term Ômarket focusÕ results in lower academic standards or at least much more work for academics in delivering programmes. Mazzarol and Soutar suggested that market segmentation concepts should be given more attention in universities. This would surprise many Australian academics who collectively struggle with choices not only between niche versus large-scale generic programmes, but also between programme reputation through highly selective recruitment versus revenues from taking many students of lesser attainment. Education services differ fundamentally from most other services in customer quality being a significant variable in strategy. It is an integral part of universitiesÕ differentiation strategies but needs to be explicitly conceptualised and its full implications explored. Education services markets are also distinguished by profound information asymmetries; especially as they become more global in character. Mazzarol and Soutar valuably explored some of the practical consequences for marketing universities and student satisfaction. Their survey work contained the somewhat surprising suggestion that internal promotion of a service culture and the application of IT did not contribute to success in attracting international students. This may reflect a failure of institutions to communicate to the market the extent of their strengths. Important word-of-mouth referrals from happy graduates may bring rewards over time to universities striving to improve their services. What is clear is that universities need to manage student expectations, measure their perceptions of the study experience, identify the drivers of satisfaction, and make cost-benefit analyses of the worth of investments in increased student satisfaction.

At several points in their book Mazzarol and Soutar indicate that the active pursuit of international students by Australian, British, Canadian and New Zealand universities from the mid-1980s stemmed from moving state-dependent institutions from an elite to mass education footing. Comparative statistics reveal that Australian and the British universities now collectively have a substantially higher proportion of their student cohorts coming from abroad than any other higher education system; the Australian rate being some three times higher than that for the United States. In Australia at least, there still appears to be little understanding in the community that growing numbers of international students have made it easier, not more difficult, for Australians to go to university.

Although it doesnÕt figure prominently in Mazzarol and SoutarÕs book, one of the major marketing challenges for Australian universities and Australian policymakers remains to sell the benefits of having so many international students to their local communities. Fewer international students would mean fewer places in Australian universities and/or much higher financial fees for Australian students. Popular perceptions that the internationalisation of Australian university student cohorts has entailed some compromises over the quality of educational outcomes further highlights the need for a vigorous national discussion about the kind of higher education system Australia should haveÑand who should pay for it. Mazzarol and SoutarÕs valuable book prompts us to think carefully about what makes for an internationally competitive university sector.

Can Japan Compete?
Michael E.Porter, Hirotaka Takeuchi and Mariko Sakakibara
MacMillan Press Ltd, Houndmills, Basingstoke, Hampshire, 2000, 208pp, US$19.25 ISBN 0465059899

EVERY Commonwealth and State politician who has ever voted for a subsidy or tariff for an industry should at least read the introductory summary of this book. It has taken eight years of painstaking research by a leading American business economist and two Japanese economists (with an army of associated researchers) to complete. They started to tackle the problem of JapanÕs competitiveness in the late 1980s when it was fashionable to claim that the Japanese version of capitalism was outstripping the Western, notably US economies, by its combination of government and business collaboration. Japan Inc was the flavour of many months. Alice Amsden, Chalmers Johnson, James Fallows, Clyde Prestowitz, Karel Van Wolferen and Robert Wade were the gurus. Those of us who thought the Japanese model was neither the reason why Japan caught up rapidly after World War II, nor the explanation of the success of the East Asian ÔtigersÕ, were thought to be silly old stick-in-the-muds. JapanÕs ten years of stagnation and persistent difficulties in attempting to reform its economic (and political) system and the East Asian economiesÕ collapses in 1997, have put the performance of the ÔJapanese modelÕ in perspective. The cost to their peoples has been enormous.

Porter, Takeuchi and Sakakibura identify the principal characteristics of the Japanese model as follows:

¥ the belief that government should actively guide the economy, leading to the creation of powerful ministries, notably the Ministry of International Trade and Industry (MITI) and the Ministry of Finance (MOF) is the basic principle;

¥ the targeting of priority industriesÑpicking winnersÑto enhance economic growth is the core of the model;

¥ the aggressive promotion of exports, regardless of their cost to the economy, is mercantalism updated;

¥ intensive and extensive approval requirements and regulations that enable the government to keep its fingers on the pulse of most economic activities are essential;

¥ selective protection of the home market has to cushion participation in exports;

¥ highly regulated financial markets and limited corporate governance reinforce the targeting of priority industries;

¥ government sponsored R&D projects entailing cooperation between government and industries are essential for technological development; and

¥ macroeconomic policies must provide low cost capital to priority industries.

Can Japan Compete? looks at 20 competitive and seven uncompetitive industries in detail and marshals a substantial body of other evidence to test the validity of these concepts. As in East Asian countries (except for Hong Kong, Singapore and Taiwan where the Japanese model was not followed), the Japanese model resulted in the creation of dual economies with competitive exports and highly uncompetitive, cartelised and sclerotic production at high cost for the domestic market. The authors conclude:

The true test of the Japanese government model is whether its application discriminates between competitive and uncompetitive industries. Our evidence suggests overwhelmingly that it does not. In the competitive industries, the govern-ment model usually played little, if any, role. There was little intrusion in comp-etition, few cartels, and few cooperative R&D projects. In the uncompetitive industries, the govern-ment model was prevalent. There was rampant intervention in competition, numerous cartels, and often widespread cooperation (p.44).

The study carefully details the dynamic effects of the targeting of priority industries. The subversion of the financial and fiscal system inevitably follows. The Japanese Government was able to provide vast subsidies for targeted industries while maintaining budget surpluses at the cost of living standards (notably in housing), by undermining future incomes (by not funding pensions) and urban aesthetics. Is there an uglier city than Tokyo, except perhaps Seoul?

The Japan model for Government participation in R&D (echoed in the Knowledge Nation with its emphasis on picking industries as winners and government support for R&D), is particularly damning. Porter, Takeuchi and Sakakibara examined 237 government sponsored R&D cooperative research consortia in a wide range of industries spanning the period from 1959 to 1992. They cost $US10.5 billion. MITI was the principal sponsor. The study found Ôno clear link between cooperative R&D projects and competitivenessÕ (p.42). Most of JapanÕs technological innovativeness has, in fact, been the result of independent R&D by firms such as Sony that MITI refused to fund. The Japan model R&D component has also, no doubt, been responsible for JapanÕs missing out on the internet and associated technology developments which come from a country that the Japan model admirers claimed in the 1980s, and even in the 1990s, would be outpaced by Japanese technology within a decade.

The study unfortunately does not delve into the political results of the Japanese model, that is, how, by stimulating cronyism within industry and finance and linking it to bureaucratic and political cronyism, the political system has been corrupted and reform has not only become excruciatingly difficult, but, thus far, impossible.

Australia has, indeed, much to learn from the Japanese model: chiefly what not to do. Hopefully the media will be as assiduous in spreading the message of the Porter, Takeuchi and Sakakibara study as they were in misleading audiences with their earlier adulation of the Japanese model.

Happiness and Hardship: Opportunity and Insecurity in New Market Economies
Carol Graham and Stefano Pettinato
Brookings Institution Press, 2002, 174pp, US$17.95 ISBN 0 8157 024108

What prospects do the poor have to break into the upper income levels? How satisfied will they be with their progress and what are the implications for public policy? This book examines these questions andin doing so makes important contributions into studies on inequality and progress.

The book is one of the few in the economics literature that considers issues of happiness. The authors use their own and existing research to explore happiness through consideration of issues of inequality, income mobility, relative concerns and social capital. More boldly they relate these issues to political acceptance of market-oriented growth policies and propose policies that might be more suitable.

The authors build on hypotheses that focus on perceptions of relative income and prospects about future income change or mobility. They begin with a very useful summary of the existing research regarding happiness, relative concerns and income mobility. They note that the growing literature on happiness studies support their view that as incomes increase, absolute income becomes less important than relative concerns. One of the bookÕs strengths is its focus on exploring concepts and trends in income mobility. Income mobility refers to the ease and frequency by which people move between income levels. It is an important concept for inequality. We may be more accepting of inequality if we believe there are greater prospects for those on low incomes to move into higher income levels.

The authors review what we do and do not know about income mobility. They take a look at the determinants of income mobility considering factors such as education and incentives. They also compare income mobility between nations and not surprisingly find that developing economies such as Peru appear to offer greater mobility prospects than stable ones like the US.

A strong feature of their research is the use of survey data from developing countries. As the authors note Ôsome of the factors that influence individual assessments of well-being, such as income mobility, macroeconomic volatility and occupational status, fluctuate more in developing countriesÕ. Their research breaks new ground particularly in examining the relationships between macroeconomic changes, happiness and pro-market attitudes. Perhaps not surprisingly they find strong relationships between happiness and having a pro-market attitude. A very disturbing finding is that there are many frustrated achieversÑpeople who despite being very upwardly mobile report low levels of satisfaction with their progress.

Although there are some powerful findings and important concepts introduced in the book I found it less than satisfying. The book appears to suffer from being largely an expansion of two previous academic articles by the authors.1 The two main chapters are largely verbatim repeats of these articles.

The authors do not deal well with the transition from articles to a book. Although, in the book, they provide greater explanation of technical concepts their attempts may backfire. For example, in using several paragraphs to explain the measure Ôlog-incomeÕ, they risk confusing the reader more by, without justification, aligning the log-income measure with that of utility.

The material that is not taken from the articles can be unconvincing. In their chapter on challenges for policy and research the authors argue for three sets of policies they think would enhance mobility. The policies, which include broa,dening of social services, are not well supported with clear arguments. Their argument for reduced market distortions appears weak because their description of the distortions is brief and contained in a previous chapter.

The editing is poorer than I would expect from the Brookings Institution. I found myself correcting style errors. More frustrating is that some sections of the book are repeated. Large chunks of analysis (including footnotes) are copied between chapters. The conclusion of chapter 5 includes several paragraphs which are basically repeated nine pages later in the next chapter.

The material in this book is of great importance and should be of interest to policy-makers and particularly anyone interested in inequality. But is it worthy of a book given it is a short 174 pages with much repeated material? The articles upon which the book is based are more succinct and are easily accessible through the Brookings Institution website (www.brookings.edu, then search using the authorsÕ names). Despite the bookÕs significant contributions I believe you will be happier and suffer less financial hardship choosing the articles over the book.

Endnotes
1 C. Graham and S. Pettinato, ÔFrustrated Achievers: Winners, Losers, and Subjective Well Being in New Market EconomiesÕ, Journal of Development Studies (Fall 2001) and ÔHappiness, Markets, and Democracy: Latin America in Comparative PerspectiveÕ, Journal of Happiness Studies (Fall 2001).

Review by Chris Leithner

The PrinceÕs New Clothes: Why Do Australians Dislike Their Politicians?
David Burchell and Andrew Leigh (eds)
University of NSW Press, 2002, 224pp, $34.95, ISBN 086840604X

THIS BOOKÕs authors note that in 1976, when asked by an opinion pollster to rate their politiciansÕ ethics and honesty, only one in five Australians answered ÔhighÕ or Ôvery highÕ. In 2000, this percentage halved to one in ten. The editors also observe that Australians have perhaps never held politicians in high esteem, but their reputation today is more tattered than ever.

These results and their trend beg an important series of questions. Why do so many Australians distrust their elected representatives? Why do they claim to be disillusioned about politics? Has the behaviour of politicians really deteriorated? Does it matter that distrust and disillusionment run so rampant?

The book comprises nine substantive chapters divided into three parts of three chapters each: overviews of what are regarded by the authors as ÔproblemsÕ of trust, disillusionment and perceptions about politics by members of the general public (Murray Goot, Andrew Leigh and David Burchell); views about these problems by former politicians (Jan Wade, Bob Hogg and Jeff Shaw); and historical and conceptual perspectives on political ethics and trust (Jeffrey Minson, Conal Condren and John Uhr).

This is a quintessentially Australian book. That is to say, one searches in vain within its pages for a single important point that is both striking and non-trivial. What is striking in the book is trivial (for example, WadeÕs recommendations, apparently seriously intended, that in order to become more respected politicians should be more honest, better remunerated and better behaved during Question Time); and what is non- trivial is not original (for example, GootÕs thorough empirical summary of opinion poll data, and LeighÕs overview of the theoretical literature, particularly bearing on these matters).

GootÕs and LeighÕs chapters comprise the heart of the book. Leigh sets out seven hypotheses that have been propounded by others to explain declining trust in political leaders. One is the ÔWorld War II effectÕ (that is, the success of government in winning the war gave rise to a faith in government which endured through the early 1960s, only to be dashed by the social and economic problem of that and subsequent decades). A second is poor leadership: the calibre of todayÕs politicians is simply inferior to that which prevailed in the past. Others are the removal of incumbent governments, economic growth (or its absence), declining interpersonal trust, declining respect for hierarchical institutions and the role of the mass media.

LeighÕs conclusion, like those of the other authors, is very tentative: Ôjust as Goot has cautioned that the decline in politiciansÕ standing for ethics and honesty should not be taken as evidence of a ÒcrisisÓ of trust, I would warn against accepting any single explanation for the phenomenon. No one factor has caused trust to wane, and for those who seek to boost the standing of politicians, no Òsilver bulletÓ solution exists.Õ

This is thin gruel indeed. It is also incomplete. In this respect it is important to emphasise that the Ôsocial contractÕ that implicitly underlies much of this bookÕs contents is a curious type of contract. Apart from being purely metaphorical (and mythical), it differs diametrically from a typical and legitimate contract in the sense that one party (that is, the state, government, politicians, etc.) can and do unilaterally decide when the other party (that is, the individual producer and taxpayer) is in violation of the contractÕs terms, and hence under obligation to surrender property. Further, and more generally, it is not my actions that cause me to violate the contract; rather, it is the actions of others, most notably when at elections they vote themselves access to my property or decide to proscribe certain mutually beneficial activities or transactions among individuals.

Relations between politicians on the one hand and taxpayers on the other thus involve no kind of legitimate exchangeÑanymore than a victim handing his wallet to a mugger legitimises theft. No Australian, then, has a valid contract with the state, government and politicians. The state unilaterally takes our money via force. If you doubt this, stop paying your taxes and see what happens. Taxation is theft, plain and simple.

If taxation is indistinguishable from theft, then it follows that governments and politicians, which subsist on taxation, are simply agents of a vast criminal organisationÑone that is far more formidable and successful than any private ÔmafiaÕ. George Washington put it most succinctly: Ôgovernment is not reason; it is not eloquence. It is force. Like fire, it is a dangerous servant and a fearful masterÕ. If the editors of and contributors to this book wish to answer the question Ôwhy do Australians dislike their politicians so?Õ, then they should consult studies which have answered it: the works of Murray Rothbard (The Ethics of Liberty, New York University Press, 2002) and Hans-Herman Hoppe (Democracy: The God that Failed: The Economics and Politics of Monarchy, Democracy, and Natural Order, Transaction Books, 2001). Both, unlike this book, are striking and non-trivial.

Policy is the quarterly review of The Centre for Independent Studies. For more information on subscribing to Policy, click HERE

If you are interested in the Centre's activities and publications, why not subscribe to e-PreCIS, our regular email update on the latest news and events.

(e-PreCIS requires html capable email facilities, such as Microsoft Outlook Express or Netscape Messenger)