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Robert Gerard - throwing the switch on cronyism

By Nicholas Gruen - posted Wednesday, 7 December 2005

What’s given the West two centuries of economic progress? It wasn’t capitalism. It wasn’t democracy. As the Russians and an army of gung-ho economic advisers learned from the depression that marked Russia’s transition into the modern world, capitalism and democracy only thrive on well functioning institutions.

Institutions were trashed in Soviet Russia. They’ve not fared too well here lately either. The government’s continuing defence of Robert Gerard’s indefensible position on the Reserve Bank board exemplifies the current malaise. One by one, independent institutions feel the pull of an Orwellian vortex of executive party political power and spin.

Thus governments coast-to-coast, of both political persuasions, fund political advertising that’s ever more thinly disguised as public information. Officials holding high office are appointed and dismissed at whim. After some unguarded concession of the obvious, they issue “clarifications” to protect their jobs and their political masters. Upper houses cease reviewing the governments who now control them. And so it goes.


If we want to protect our institutions, and so secure our democracy against cronyism, we could start with the Reserve Bank board.

The Americans subject their major appointments to congressional confirmation hearings. But setting politicians to catch other politicians’ appointments has been a recipe for a circus.

By contrast, Britain’s quieter approach has lifted expectations of public appointments far higher than ours. Prime Minister John Major established the Committee on Standards in Public Life in 1994 after a scandal in which Conservative MPs asked questions on notice, for £2,000 a pop from Harrods' owner and once aspiring father-in-law of Princess Di, Mohamed Al-Fayed.

According to the resulting “Nolan Rules”, appointments to public boards are still made by ministers, but only after positions have been advertised and a merit-based shortlist is compiled by a panel that must include an independent assessor.

Ministers can depart from the procedure - including by appointing someone not on the shortlist - but this must be reported to the Commissioner for Public Appointments who may comment publicly.

Of course these mechanisms don’t guarantee integrity in government, and there’s a range of important appointments to which they don’t apply - including appointments to the Bank of England monetary policy committee (the closest equivalent to our RBA board).


But they sure help. Their very existence sets expectations which are influential even where they are not technically required. And the Committee on Standards in Public Life remains a focal point for deliberation on emerging issues of relevance.

In 2003 it reported on what we call ministerial “minders” or “staffers”. In Australia they’re the very model of Nixonian “plausible deniability” - ministers’ agents one day, people who forgot to tell the minister that chldren hadn’t been thrown overboard the next.

This year the committee put pressure on Prime Minister Tony Blair after his wife Cherie earned some quick cash discussing her busy life with Tony on the lecture circuit.

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First published in The Courier-Mail on December 7, 2005.

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About the Author

Dr Nicholas Gruen is CEO of Lateral Economics and Chairman of Peach Refund Mortgage Broker. He is working on a book entitled Reimagining Economic Reform.

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