Global Challenges, Smart Solutions
22 November 2016
This is the text of a speech given by Chief Executive Jennifer Westacott to the Crawford School of Public Policy today.
Check against delivery.
Ladies and gentlemen.
I would like to acknowledge the traditional owners of the land on which we are gathered, the Ngunnawal people, and pay my respect to their Elders – past and present.
I would also like to thank the Crawford School of Public Policy for inviting me to speak this morning.
I’ve spent many years of my career contributing to public policy. I’ve done it as a public servant in government, as a consultant, and now as the Chief Executive of the Business Council.
And I’ve done that because I want to help give all Australians the opportunity to reach their potential.
To paraphrase Margaret Mead, good policy is based on the idea that ‘a small group of thoughtful committed citizens can change the world’.
So, what do we need to do in policy to change the world?
My key proposition today is that we need a new way of working.
Fundamental to this shift is the business community reasserting our legitimacy and authority to contribute to the policy debate.
And for business and academia to forge a new era of cooperation.
Because all major institutions in our society – government, academia, businesses, and religious organisations – have a moral imperative to contribute to policy to improve our country.
When I talk morality, I am talking about our contribution to improving the human condition, not religious morality.
Our society was built on humanist values, and morality is core to humanist values.
And business has long played its part in Australian society.
It is private enterprise that generates the wealth necessary to grow and prosper.
The private sector represents over 80 per cent of our economic output.
And it accounts for 10 million jobs or 80 per cent of the total workforce.
Australians’ real incomes have doubled in per capita terms over the last 40 years.
This has been on the back of Australian enterprise and the liberalisation of our economy.
This growth has enabled intergenerational mobility, and it has given government the money to fund a safety net.
In other words, the community and the economy are linked. You cannot have one without the other.
But despite all of this, we have recently developed a notion that we can have a socially progressive society and strong safety net, without successful businesses.
That is a false notion, and one I want to put to bed today.
Business has a vital role to play in our society.
And it has never been more important for business to be working with other institutions to solve the challenges we face.
Because the one really clear competency that business has is problem solving. I would argue it’s our comparative advantage.
To expand on this I’d like to answer four key questions this morning:
- First, what is policy and what is its purpose?
- Second, what are the challenges our nation is facing?
- Third, what are the smart and not so smart solutions to these challenges?
- And finally, what is the role of business?
The purpose of policy
To begin with, what is the purpose of policy?
In some ways I envy all of the PhD students in this audience. You have the incredible privilege of spending a number of years studying policy and developing your craft.
At its heart, public policy is quite simple. It’s problem solving.
And while I might envy you the opportunity to hone your craft, I don’t envy the problems you will be confronting.
The simple truth is that there are few easy policy problems left.
Most of the low hanging fruit has been taken, and many of the problems we need to solve are ‘wicked’ problems.
And part of the reason we have so many difficult problems is that the right policy direction will often result in a clear set of winners and losers.
And when weighing up the policy consequences, the important consideration is to not cause hardship for people who have no choice.
This is part of the conundrum we have gotten ourselves into when it comes to debates such as superannuation and the retirement income system.
But as the Prime Minister said at the Business Council dinner last week, we need to adopt a mindset of fairness – where the system is fair overall.
Not where every single aspect of every single decision means that no one ever has to make any form of adjustment.
This has become the new paradigm for public policy making, and it can’t go on.
And you all have a responsibility to contribute to tackling these very difficult problems. As John F Kennedy said:
‘ … in return for the great opportunity which society gives the graduates … it seems to me incumbent upon graduates to recognize their responsibility to the public interest.’
So let’s go to the global challenges, because they are at the centre of the policy interest for government, academia, the community sector, and business.
Australia faces multiple challenges covering the spheres of economics, politics, security, demographics, and the environment.
And I think these key challenges can be broken down into traditional and non-traditional policy dilemmas.
The traditional policy dilemmas are pretty clear.
How do we keep growing the size of the pie? And by pie I mean the economy.
And by growth I mean rising real incomes per person. That is, on average, an individual’s purchasing power increases.
How do we take advantage of the unprecedented pace and scale of technological change, particularly given that the tyranny of distance is fast becoming a non-issue?
How do we preserve a safety net given our budget has a structural deficit?
And how do we ensure we don’t head down a path of inequality and entrenched disadvantage?
These are difficult questions and, while the context has changed, we’ve considered them before.
But I also think we’re facing two new challenges that we haven’t dealt with in policy, or business, before.
The first is the rise of the consumer.
In a speech I gave at the Crawford School earlier this year, I spoke at length about this, and the challenges it presents for business and government so I won’t repeat that now.
But, the rise of the consumer is a new and difficult challenge, and one that we must talk about.
The second new challenge is an unspoken one, and perhaps the hardest to overcome.
It is the loss of faith in institutions.
A loss of faith in government, organised religions, business, and our modern democratic societies.
People think governments have run out of ideas and credibility.
And while governments have run out of money and Australia has a structural deficit in its budget, citizens seem to think there is an unending supply of revenue.
At the same time, citizens are looking to their governments for more support and better services than ever.
Throughout history, organised religion has provided a moral compass and comfort to many people.
But some organised religions have failed their members. While people may maintain their faith, their trust in the organisation has been eroded.
It is controversial to talk about sexual abuse scandals and the church, but we would be in denial if we ignored the broader impact on society.
To those in the church, and those outside.
It is the job of all adults to protect children in our society. When our institutions, church and state, fail in that duty, they fail everyone.
Turning to big business, we are not exempt from creating the disillusionment with institutions.
There is a loss of faith and trust in business that was cemented by the behaviours in some firms that led to the Global Financial Crisis.
The economic hardship caused by the Global Financial Crisis has been outweighed tenfold by the loss of trust.
We cannot walk away from the fact that continued reputation problems erode trust in business.
People have also begun to distrust the major forces that have driven Western democracies since World War II – globalisation, migration and technology.
This mistrust comes at a time when social media throws a whole lot of things up in the air.
We thought we’d gotten rid of superstition, ignorance and jiggery-pokery.
But now we find that through social media people can now perpetrate a mass lie and there is no trusted institution to correct it.
So, in the face of this loss of trust and ongoing erosion, people are anxious.
They are disengaged. And they are frustrated.
People are working hard, contributing economically and to their community. But despite this, they feel they still can’t get ahead.
This combination of feeling worse off and low trust is the essential conundrum we are facing.
Smart solutions – new mindset and leaderships
So, how do we create smart solutions to solve both these new and more traditional challenges?
I contend that the best way to solve the loss of trust in institutions is developing a new mindset and approach to leadership, across all our institutions.
I think our 21st century leaders need a humanities mindset.
I spoke about this at another speech to ANU academics recently, but it is especially important to policy practitioners.
By a humanities mindset, I mean they need to understand the human condition.
They need the qualities of critical thinking, synthesis, judgement and an understanding of ethical constructs.
Leaders need to be grounded in a deep understanding of what is going on in the world, and how people feel about it.
Take for example the issue of digitisation and technological change.
The speed of change is dizzying, and as I said earlier, we know that people are scared.
Leaders need to take that fear seriously, but they also need to show people how technological change leads to progress.
In the 20th century, the race to the moon didn’t create fear or a victim’s mindset. It inspired the hearts and minds of citizens around the world, and it unleashed a technological revolution.
Our leaders today need to show the opportunity that comes from progress.
We need to keep in mind, as Benjamin Franklin did, that ‘without continual growth and progress, such words as improvement, achievement, and success have no meaning.’
And continual growth and progress have a social element.
Growing the pie is not a goal in and of itself. We want to grow the pie so the benefits can be shared, and people believe in the intrinsic value of progress.
Because the test of progress, as proposed by Franklin D Roosevelt, ‘is not whether we add more to the abundance of those who have much, it is whether we provide enough for those who have little.’
It is also paramount that we have leaders of substance and purpose.
Real leadership – moral and purposeful leadership – is not easy.
Our leaders’ greatest strengths should be the values of citizenship – honesty, compassion, respect, responsibility, and courage.
And, critically, they need intellect, empathy and aspiration.
So we know that when our leaders in business, government and the community are making decisions on our behalf, they are guided by a clear organising framework.
One that is committed to delivering prosperity for all, and has people at its heart.
That’s how we build confidence, and that’s how we earn trust.
Different approach to public policy
And when we’ve built that trust, I think it’s imperative we adopt a new approach to public policy.
We need to accept that the old ways of thinking will simply not cut through. And the old ways of doing things won’t work.
At the moment, policy is pursued in many arenas.
Independent agencies like the Productivity Commission, consultants, academia, think tanks, policy and advocacy agencies like the Business Council, and business itself.
But the true custodians of policy are the public service.
It is really only the public service that goes through every stage of policy:
- Problem identification.
- Getting Cabinet buy-in to it being a problem worthy of government’s attention.
- Designing a solution.
- Finding a way to fund the solution.
- Co-designing solutions and getting stakeholder buy in.
- Helping Cabinet and the government to create a narrative for why the change is needed and how to explain how something will work and impacts of a policy change.
- Testing and proof of concept, proofing an idea and carefully socialising it.
- Designing a workable implementation, and then implementing it efficiently and effectively.
- Managing any fallout, and learning from and correcting the inevitable implementation failures.
- And last but not least, embedding the cultural and organisational change that is generally needed for new policy and new programs.
I would argue far too much policy is being developed on the run and in the public domain.
Or as a series of announcements when the detailed work has not been done.
Important design steps, particularly testing and scenario modelling are skipped.
And co-design with external experts, including those in service delivery, has become a rarity.
Good policy needs to be tested, and that’s why the concept of a green and white paper worked.
It gave government room to work with experts and test ideas with stakeholders.
As someone who arguably has influence, but also often watches from the sidelines, it is frustrating to see narrow perspectives and poor process kill good ideas.
I have no argument with the public service remaining the custodian of policy.
And I strongly support the important roles Cabinet and our Parliament play in creating the laws of this country, and representing all citizens.
But, the lack of engagement, transparency and collaboration in policy development cannot continue.
I just outlined 10 fundamental steps for a good policy development process. And all 10 steps pose risks and unknowns.
How can it possibly be realistic for this to be the domain of one institution?
Surely business, academia, the community sector, and religious groups have expertise that could improve our policy?
I for one know there’s no shortage of will to contribute.
Einstein could have been talking about how we do policy in Australia today when he said ‘we cannot solve our problems with the same thinking we used when we created them.’
It’s time for a new approach to public policy in Australia.
Let’s begin with true co-design and transparency, and see new ideas and creativity flourish.
Clear policy agenda – smart policy vs. not smart policy
We also need to pursue a clear policy agenda to overcome our more traditional policy challenges.
The first thing business and academia need to do is recapture the centre, and bring policy with it.
History tells us we don’t grow the pie and share the wealth on either end of the extreme.
People are questioning globalisation, migration, innovation and the value and virtues of technology.
But these have been, and will continue to be, the drivers of Australia’s prosperity.
The smart policy would be to create an environment which encourages more investment, innovation, and more and better jobs.
The smart policy would be to capitalise on the opportunities of the ‘internet of everything’.
The not so smart policy agenda would be to lock up the economy, protect industries and jobs, and put up barriers to trade.
It would be counter-productive and the forces of technology simply wouldn’t allow it.
The smart policy would be to have thriving and competitive large, small and medium businesses that interact and complement each other.
The not so smart policy agenda would be to pit large and small businesses against one another, which would further stymie our competitiveness.
The smart policy would be to drive higher investment through a more competitive tax system.
The not so smart policy agenda would be to ignore what our competitors are doing with their company tax rates.
Some economists say reducing company taxes is a leap of faith.
I’ll tell you what the leap of faith is: it’s leaving them where they are.
That leap of faith assumes that people will continue to want to do business here, no matter how expensive or how hard it is.
The smart policy would be to build a world-class education and skills system by having a future-oriented VET and higher education system.
The not so smart policy would be to continue to say VET isn’t as important as higher education.
The smart policy would be to take our school system into the 21st century by improving teacher quality and moving beyond a traditional class-based model.
The not so smart policy agenda would be to expend all our energy and time debating false funding shortfalls in schools.
Or reducing class sizes when the evidence tells us that should not be a priority for the majority of students.
The smart policy would be to overhaul combative workplace relations to foster innovation and creative workplaces.
The not so smart policy would be to maintain a system that discourages collaboration and risk-taking.
The smart policy would be to build stronger budgets through effective service redesign so we can continue to have a safety net into the future.
The not so smart policy would be to confuse reforming service delivery with crude cost-cutting.
Or, to put off into the never-never that we have a structural spending problem to resolve.
While there may be disagreement on how we deliver the smart policies, I doubt many people would disagree with this list and we need to get on with it.
The role of business
So, in terms of the role of business let me start with what I think business can bring to the public policy domain.
If you take up my challenge to create a new era of cooperation, the most important thing to remember is that business people are great problem solvers.
I’ve had the privilege of working with a range of business leaders, and their capacity to solve complex and difficult problems is astonishing.
So in every policy issue you are confronted with, I urge you to call on leading business people to contribute their thinking.
And don’t put them in a traditional committee structure that will stymie them.
Beyond their ability to solve problems, business has a role to play in creating a moral and a good society.
Like any organisation, some businesses have failed to do the right thing, but we shouldn’t tar all businesses with that brush.
Business is a force of wealth creation. And wealth should not be a dirty word.
As Edmund Burke so eloquently expressed in the 1700s, ‘It is the interest of the commercial world that wealth should be found everywhere.’
And business is a force of job creation. Meaningful work gives dignity and purpose. And a jobless society is not a successful one.
Joblessness condemns people to poverty and removes the opportunity for intergenerational progress.
Stagnating growth disproportionately affects the poorest people, not the richest ones. Slow growth too often means disparity of wealth and loss of opportunity.
It’s economic growth that gives us employment, rising wages, a social safety net, and choices and freedom.
Without growth governments won’t have much money to redistribute to achieve social goals.
Business’s role is to create employment and provide returns to shareholders, and in doing so they create the growth that can be used to tackle core social challenges.
But like other major institutions, business and business leaders have made mistakes.
We need to restore the trust of Australians. We also need to step up to the policy debate.
We need to stand up as leaders and explain why growth will help everyone.
And we need to have the patience and commitment to explain how economic growth unlocks prosperity and advancement.
And you in the academic community must work with us.
You need to bring PhD students into business and expose them to diverse ways of thinking.
And we all need to learn a new language. We need to learn the language of public policy, and you need to learn the language of business.
And collectively we need to encourage society to see public service as an inherent good.
As John F Kennedy said, ‘Let the public service be a proud and lively career.’
In concluding my speech today, I want to come back to the PhD candidates in the audience and give you some words of advice.
First, I would encourage you to focus on real world needs and outcomes when you’re tackling policy problems.
We policy practitioners can be guilty of making things far too academic.
The most elegant policy design will be in yesterday’s news cycle if it can’t be implemented.
Never lose sight of the problem you are trying to solve, but remember to be practical.
If you can get up a solution that is 70 per cent of what you envisioned AND broadly delivers the outcomes, don’t wait for perfection.
I think the most important quality you need to be successful in policy is resilience.
You will come up with many ideas, some brilliant and some not so good.
The one thing I can guarantee is that not all of your brilliant ideas will get up.
Some won’t get up because it’s the wrong time.
Others won’t get up because it requires political capital a government doesn’t have.
But in the face of these setbacks, you will need to be resolute and remember why you’re in policy.
As Winston Churchill said, ‘Success is not final, failure is not fatal: it is the courage to continue that counts.’
My final message is I would urge you to consider where you focus your talents.
Make the commitment that you will not limit yourselves to academia.
Commit to working in business, and with business, so we can collectively solve the global challenges in front of us.
After all, the best successes are collaborative and shared. The best thing you’ll ever achieve is with a team of people.
And always remember, business is a fundamental contributor to society, and to solving policy dilemmas.
In a recent New York Times opinion piece, the Dalai Lama and Arthur C. Brooks said ‘those in positions of responsibility have a special oportunity to expand inclusion and build societies that truly need everyone.’
That is the challenge and opportunity that lies before you. I look forward to seeing what you achieve.