The world before public affairs

Business is under increasing pressure to serve society

By David Merrett

Victims of ‘corporate criticism’ and ‘regulatory activism’?

My views are those of an ‘outsider’, as someone looking into the world of corporate public affairs. However, I have spent the greater part of my professional life studying Australian business, particularly big business. In preparing for this talk I was struck by the defensive language used in the Corporate Public Affairs publications. While the public may see the ‘big end of town’ as enormously powerful, I get the sense that many businesses see themselves as innocent victims of ‘corporate criticism’ and ‘regulatory activism’.

Was business always under the sorts of pressures it feels today? Why are so many government agencies and social movements ranged against it? My aim is to give you my interpretation of why Australian business, from a corporate public affairs point of view, was able to lead a charmed life up until the 1960s and 1970s. This raises the question of why business has found itself in a more adversarial role subsequently. Finally, I shall speculate on whether the situation is likely to change.

All of the issues that currently inspire ‘corporate criticism’ and ‘regulatory activism’ have been around for a very long time. Economic development left scars from the first days of European settlement. Trees were cut down, cleared land became subject to wind and water erosion, irrigation resulted in salinity, native grasses were eaten out, introduced fauna and flora replaced some native species, Aboriginal people were displaced, mining activity choked streams and rivers, and manufacturing processes produced hazardous air and water-borne wastes. Some of the newer chemicals were poisonous, while coal fired power generators and leaded petrol did harm. Uranium was mined. Adulterated food products, flammable children’s clothing and dangerous electrical appliances were sold to the public. The economy became populated by monopolies and anti-competitive behaviour was rife. Businesses failed and swindlers parted investors from their money.

The circumstances pre-1960s

My point is that none of the concerns I mentioned above fuelled any widespread anti-business feeling before the 1960s. Certainly, none generated the ‘traction’ that would be the norm today. There were opposition groups that coalesced around particular issues from the late nineteenth century: the environment and Aboriginal people had their champions; there were calls for banking reform from the 1890s; radical pamphleteers attached monopolies and ‘trusts’ from around the First World War; and in the 1930s country housewives pioneered what became the modern consumer movement.

Business has always been engaged in a dialogue with governments. For the most part, business got what it wanted. Access was not a problem. In the words of Geoff Allen, ‘For most of the past century the unchallenged concentration of political power in the hands of a few top bureaucrats and senior Ministers had made policy advocacy a relatively simple and direct matter.’ Moreover, the flourishing industry-specific regulations – tariffs, subsidies to rural producers and manufacturers, occupational licensure, entry restrictions into liquor retailing and so on always favoured the interests of producers over those of consumers. So much so that such arrangements have been roundly criticised as ‘rent seeking’ and explained by ‘regulatory capture’.

Why was business immune to sustained criticism and challenge in the past?

One part of my explanation rests on the slow speed with which big business emerged in this country. Their coming posed no general threat to the existing order, indeed until after WWII government enterprises were far larger employers. In the US, by contrast, giants such as Standard Oil, US Steel, AT&T, the railways and so on, burst onto the national stage in the last decades of the nineteenth century. Their size and power prompted government regulation. Australian business continued to be perceived as being ‘partners’ and ‘citizens’ until the 1960s and 1970s. Unlike their American cousins, local businesses were securely grounded within the myths surrounding national identity.

The unifying story about the Australian experience throughout the nineteenth and much of the twentieth century has been one of ‘progress’, ‘nation building’ or ‘national development’, the latter including notions of modernity and national security. Art, literature and political rhetoric sought to interpret and legitimate this pioneering endeavour. It was a world in which everything had to be built from scratch, literally and figuratively. The wilderness became a garden, ordered and productive. Towns and cities rose up from rude hamlets to possess all the accoutrements of civilisation and culture. A new order emerged. There was pride in achievement and a sense of confidence in the future. The story was one that fused individual and communal effort and reward.

That optimism was punctured temporarily around the turn of the twentieth century. A combination of labour unrest, bank crashes, a serious depression and calamitous droughts signalled the need for a new social and political compact. Nation building required new institutional developments. Federation united the Australian colonies in 1901. In the context of a new national parliament, a two-party system emerged replacing the factional politics of the past. By 1909 an agreement had been hammered out between labor and its conservative opponents that would give direction to Australian politics until the 1970s. Australian turned inward: White Australia and tariff protection excluded unwanted visitors and competing goods. Moreover, the state would determine needs-based wages and provide welfare. Governments would continue to promote national development through the encouragement of immigration and the building and operation of national infrastructure.

Where does business fit in these national myths? Business, in the form of the family farm, the stock and station agency, the small engineering firm and the corner shop, was the key instrument in the process of pioneering, building the economy, populating and civilizing. The emergence of large organisations, the big end of town, added weight to the story rather than over-turned it. Manufacturing came to have a special significance throughout the first half of the twentieth century as the growth of agriculture and mining slowed. Firstly, it was widely believed that only industry could provide jobs on a scale that would allow for continued population growth. More importantly, manufacturing was science-based and ‘modern’, a symbol of a civilised and powerful society. Industrial strength also promised the national security that Australians craved.

These ideas about manufacturing were communicated to the Australian people through a wide variety of media. Books such as Roy Bridges’ From Silver to Steel: The Romance of the Broken Hill Proprietary, published in 1920 and Ambrose Pratt’s The National Handbook of Australia’s Industries (1934) celebrated these achievements in word and picture, this was a story about ‘production’ rather than ‘brand’. The marvels of modern engineering such as the transcontinental railway (1912-17), the Sydney Harbour Bridge (1924-32) and the Snowy Mountains Scheme (1949-74) were widely reported in the press, lionised in books and shown in newsreels in cinemas. It’s a tale of modernity and scale, a story of national pride and reassurance.

The 1960s and 1970s

These beliefs about the world were challenged in the 1960s and 1970s. One of the most profound changes was the rejection of the prevailing economic orthodoxy, the Keynesian-consensus, which had legitimated government intervention in the economy. By the 1980s there had been a sea change in the nature of Australia’s political compact. The old order of inward-looking protected business, needs-based wages and a welfare state, was rejected. It could no longer produce full employment, low inflation, or generate a growth of personal income to match that of other OECD countries or Asian dragons. Bureaucrats and politicians were seen to serve their own rather than the public interest. Business had fought hard alongside the conservative side of politics to achieve the brave new world of small government, deregulated markets and individual freedom.

The decades of the 1960s and 1970s also saw the rise of the issue based movements such as the consumer movement, Aboriginal rights, the environment, the peace movement, the women’s movement, gay rights and so on. As Ian Marsh reminds us in his excellent book, Beyond the Two Party System: Political Representation, Economic Competitiveness and Australia Politics (1995), the ideas that stimulated these movements within Australia were imported from abroad. In many cases, the movement’s ‘formation was stimulated by a seminal book – a kind of secular tract that served to galvanise popular concern about, and understanding of an issue and to suggest a program of political action.’

The corporate public affairs challenges facing the resources industry provides the starkest example of changing public attitudes. Geoffrey Blainey’s popular histories of mining in an earlier era are located on the mining fields in outback Queensland, Broken Hill and north-western Tasmania rather than in Collins Street. They resonate with the enduring myths of pioneering and a benign technology. Moreover, heroes in these stories are the individuals living and working in distant communities, not the companies. Compare these sympathetic portrayals with the welcome given to resources companies from the mid-1960s onwards. The development of new mines in the remote parts of northern Australia might have struck a chord with the retelling of the old stories. Instead, they have found themselves in battles with peace activists, environmentalists and Aboriginal rights groups.

Business was challenged in new ways. New regulatory agencies sprang up in the 1960s and 1970s giving legislative force to the concerns of the issues groups, the environmental protection agencies, consumer affairs in the trade practices legislation, occupational health and safety and so on. Science, once the hand maiden of progress, now provided ammunition to its enemies. Cherished notions of development, expansion and growth were challenged by new metaphors such as the ‘limits to growth’ or ‘space ship earth’. Old stories of taming the wilderness to make it productive were countered by allegations of environmental destruction. Environmental impact statements became the order of the day. Tobacco and asbestos manufacturers began a long retreat. The affairs of companies are subject to a multitude of new regulations.

Did business win a pyrrhic victory in the acceptance of a new social order, the world of individual liberty and small government? Taxes are lower and unions less powerful. However, it is hard to see that the level of government regulation has decreased – one sort of regulations have been swapped for another. On a more fundamental level, it is more difficult for business to make a case about its social worth in the new environment. The point is eloquently made by the eminent scholar Carl Kaysen in his introduction to The American Corporation Today (1996) when he writes ‘it is not only government as an instrument that is widely seen as inherently flawed; it is the idea of social interests and social goals other than the result of essentially self-referential individual choices that is widely suspect. This view is … often cast in populist terms: any attempt to define social goals beyond the aggregate of individual desires is termed “elitist” and attacked accordingly.’

In the new world that champions individualistic choice, the overwhelming responsibility of business is to offer ‘value’. But to whom? The shareholders and customers have been the winners. However, the bonds of citizenship and community have been loosened. Australian-based firms may seek competitive advantage by downsizing, outsourcing and moving their operations offshore. Globalisation has meant access to cheaper goods and services, and better quality. Part of this gain has come at the expense of Australian workers and suppliers. Firms are increasingly ‘foot-loose’, their location decisions are driven by the needs of the bottom line rather than to a commitment to a community or neighbourhood. Many of the firms that provide jobs are foreign owned, whose shareholders have little concern about the local consequences of their leaving for greener pastures elsewhere.

How does business demonstrate that it serves society where there is no consensus about social goals? What is our sense of ourselves as Australians?

The pre-1970 myths and stories about business had enormous power because they gave business a privileged place as contributing to universally held national goals, progress, modernity and security at both the individual and national level. Business was seen to deliver. That it did so muffled criticisms about the ‘costs’ arising from its activities.

Will business continue to operate in a world where it perceives itself to be without friends? Have the social issues groups won the battle for the hearts and minds? From my perspective, I do not see business as likely to lose its ‘licence to operate’ in this country. Public affairs professionals have played their part in blunting criticism and negotiating with governments. Moreover, business is indispensable to the community. There is no viable alternative. Socialism was rejected by the Australian electorate in the mid-twentieth century and communism is totally discredited as an alternative to capitalism. Business continues to generate profits, exports and jobs, and buys from local suppliers. Successful companies underpin the high standards of living in this country. Business is too important to be allowed to fail, a point made by the American political scientist, Charles Lindblom, in his influential Politics and Markets: The World's Political Economic Systems, published more than 30 year ago.

Can business recapture the position it held for so long as a valued and trusted partner within the community? That it once did so resulted from its inclusion in powerful stories and myths about national identity. The challenge for business today is to tell a story about what it does that fits into a wider national story. However, the ongoing ‘culture wars’ – the clash over the interpretation of the past – signals that here is disagreement about who we are, how we got to where we are now and where we are going.

The way forward is to build bridges with the past. The old powerful story is about the taming of a continent, albeit with the damage done to it along the way. It is a story of going inland. We need a new story to make sense of Australia’s place in globalising world, a story of going out as exporters, partners in supply chains and as multinationals. Globalisation poses challenges as great as those in the first stage of ‘pioneering’. Then we faced challenges of understanding a new continent, coping with its distance, heat and lack of water. Now the challenges come from having to find ways to compete in the wider world. All the virtues of the old story are required now: determination, resilience, the ingenuity to make do with little, and an optimism that you will eventually succeed. Immigrants, individuals and multinationals, play their part in developing the capabilities of domestic firms and industries. Venture capital and incubators are new version of old stories of start ups. Collaboration between government, scientific research institutions and business building hubs, clusters and networks is another form of community building. The outcome of this engagement with the wider world matters to all Australians. The stories of national development and business are still inter-woven. You need to find ways of telling them.

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A condensed version of the Centre for Corporate Public Affairs Oration, 29 June 2006. A fuller version is published in The Melbourne Review, 2, 2, 2006.

Professor David Merrett is in the Department of Management and Marketing at the University of Melbourne.