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How to reform and be re-elected By PROFESSOR ALLAN FELS, AO Dean The Australia and New Zealand School of Government Fri

How to reform and be re-elected By PROFESSOR ALLAN FELS, AO Dean The Australia and New Zealand School of Government Friday, 26 th November 2010 Making Reform Happen OECD, Paris. INTRODUCTION. How to reform? – lessons from Australia’s successful microeconomic reform.

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How to reform and be re-elected By PROFESSOR ALLAN FELS, AO Dean The Australia and New Zealand School of Government Fri

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  1. How to reform and be re-elected By PROFESSOR ALLAN FELS, AO Dean The Australia and New Zealand School of Government Friday, 26th November 2010 Making Reform Happen OECD, Paris

  2. INTRODUCTION • How to reform? – lessons from Australia’s successful microeconomic reform. • How to be re-elected? • How to sustain reform?

  3. MAJOR AUSTRALIAN REFORMS SINCE 1980s • Trade liberalisation • Capital markets • Infrastructure deregulation • Competition policy • Labour market reform (partial) • Tax reform • Macroeconomic policy

  4. UNFINISHED BUSINESS • Not all sectors covered • Untouched sectors include: • education, health, public services, planning, intellectual property, infrastructure, labour markets, some small business areas, pharmacies • Reform fatigue? • Recent loss of political interest? • China as source of productivity growth – and complacency? • Interest in “nation building” and infrastructure projects rather than market reform

  5. LESSONS ON HOW TO REFORM • A crisis helped • A mandate • Clear, sound reform goals and strategy • A committed, educated, political leadership • Bi-partisan support • Union, business support

  6. LESSONS ON HOW TO REFORM • A clear narrative to the public • Strong institutions and supportive bureaucracy • Good sequencing • “big bang” or “gradual” reform? • Adjustment assistance/compensation • Major financial payments to state government

  7. HOW TO BE RE-ELECTED? • Elections are lost for many reasons. • Little evidence of link between reforms and loss of the elections. • However, this is consistent with governments not making reforms that harm them electorally. • But governments often lose elections if they do not reform – they are seen as “tired” and not generally productive. • Electors often prefer “conviction” politicians.

  8. HOW TO BE RE-ELECTED? • Governments are in a strong position to educate the public and publish information about the benefits of change. • Reform may initially get media support. • Reform may create fresh interest groups and fresh sources of constituency support. • Reform may break up old opposition groups. • Reform can bring significant public benefits. • Once reform has occurred public attitudes may change towards acceptance.

  9. HOW TO BE RE-ELECTED? • Do not reform everything at once. • Have a narrative. • Use crises to justify policy changes. • Attack the status quo. • Cultivate interest group support. • Nothing guarantees re-election!

  10. HOW TO SUSTAIN REFORMS • Reform sustainability cannot be taken for granted • Politics does not cease once reform is introduced • Sustaining reform is not just an administrative implementation problem

  11. SUSTAINING REFORM • More emphasis is needed on what happens politically after reform is proclaimed. • This is not a reference to practical, administrative implementation problems that arise after a reform is proclaimed. • Rather, the fact is that politics continues usually unabated after a reform and that needs recognition.

  12. SUSTAINING REFORM • The continuing process of politics after reform is enacted may lead to: • Sustained reform • Gradual erosion of reform • Reversal • Major change in the nature of reform • After a reform there can be key political changes that make or break the reform. They may include: • Governance changes • Old supporting institutions may be closed down and new ones created

  13. SUSTAINABILITY OF REFORMS • Reform may affect the nature of politics • Identities, political opportunities and alignment of relevant group actors • Post reform investments may affect long term political outcome • Attitudes of people may change with experience of the reforms – for better or for worse

  14. SUSTAINING REFORM • The reforms may have a major economic impact. • They may even wipe out old opponents of change (although they may also create new sources of opposition). • Interest groups may change radically after reform. They may become more or less powerful. They may also have to cope with the advent of new interest groups. • Public attitudes may change in the light of experience of the reforms. • Market participants may invest in the new regime. This makes it difficult to change the new regime once it is established.

  15. SUSTAINABILITY OF REFORMS • Sustainability of reform depends on political reconfiguration after reform • Interests opposed to reform must not have power to reassert themselves • Government and reform supporters have ongoing role to ward off “reactionary” pressures • To sustain reform: • Strengthen governing capacity of reform side • Break up pre-existing structures if they resist reform • Create new constituencies • Create political cohesion • Alter pre-existing mindset

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