Weak Executives Mean Strong Bureaucracies

[Here is the text of a speech by Lang Hancock from Ron Manners’ archives, dated August 10, 1978. A hand-written note says the speech was presented to The Executives Association of Australia in Sydney, September 22, 1978 and The Australian Retailers Association, Melbourne, September 25, 1978. An excerpt of this speech was republished in Ron Manners, Heroic Misadventures (Mannwest Group, 2009), pp. 165-66.]

Weak Executives Mean Strong Bureaucracies

During and since the election campaign, there has been a great deal of talk about the seeming inability of our economic system to solve the problems of inflation and unemployment. Issues such as taxes, government power, and costs were discussed, but always these things were discussed in the context of what government intended to do about it. May I suggest for your consideration that government has already done too much about it? That indeed, government, by going outside its proper province, has caused many if not most of the problems that vex us?

How much are we to blame for what has happened? Beginning with the experience of the Great Depression, people have turned more and more to government for answers that government has neither the right nor the capacity to provide. Unfortunately, government as an institution always tends to increase in size, power and incompetence, and so government attempts to provide more and more of the answers, with less and less success.

The result is a fourth branch of government added to the traditional three of executive, legislative and judicial: a vast central bureaucracy that’s being imitated in too many states and too many cities, a bureaucracy of enormous power which determines policy to a greater extent than any of us realise, usually to a greater extent than our own elected representatives. And it can’t be removed from office by our votes.

To give you an illustration of how bureaucracy works in another country, England in 1803 created a new civil service position. It called for a man to stand on the cliffs of Dover with a spy glass and ring a bell if he saw Napoleon coming. They didn’t eliminate that job until 1945. In America there are only two government programmes that have been abolished. The Government stopped making rum on the Virgin Islands, and they stopped breeding horses for the cavalry.

We bear a greater tax burden to support our permanent bureaucratic structure than any of us would have believed possible just a few decades ago. When I was in school, governments — federal, state and local — were taking a few pence out of every pound earned. Today, governments — federal, state and local — are taking 40 cents out of every dollar earned, and two-thirds of that supports Canberra. It is the fastest growing item in the average family budget, and yet it is not one of the factors used in computing the cost of living index. It is the biggest single cost item in the family budget, bigger than food, shelter and clothing all put together.

Government tells us that in the last year the people in Australia have increased their earnings 15 per cent. Seeing that inflation was 11 percent (according to Canberra’s reckoning) we’re still 4 percentage points better off, or richer, than we were the year before. Government is being deceitful; that was before taxes. After taxes, the people of Australia are 2 percentage points worse off, poorer than they were before they got the 15 per cent raise. Government profits by inflation.

Governments, in excusing inflation, say inflation doesn’t have any single cause and therefore has no single answer. If they believed that, they have no business running the economy. Inflation is primarily caused by one thing, and it has one primary answer. It’s caused by government spending. It will go away when government decreases its spending, and not before. Governments consume wealth — they do not create it.

Government has been trying to make all of us believe that somehow inflation is like a plague, or the drought, or the locusts coming, trying to make us believe that no one has any control over it and we just have to bear it when it comes along and hope it will go away. No, it’s simpler than that. From 1948 until the present, our country has trebled the amount of goods and services that are available for purchase. In that same period we have multiplied the money supply by 10 times. So $3.50 is chasing what one dollar used to chase. And that’s all that inflation is: depreciation of the value of money.

There are 3.2 million of us working and earning by means of private enterprise to support ourselves and our dependants. We support, in addition, 3.5 million other Australians totally dependent on tax dollars for their year-round living. Now it’s true that 1.5 million of those are public employees and they also pay taxes, but their taxes are simply a return to government of dollars that first had to be taken from the 3.2 million. I say this to emphasise that the people working and earning in private business and industry are the only resource that government has.

In Defence of Free Enterprise
More than anything else, a new political economic mythology, widely believed by too many people, has increased government’s ability to interfere as it does in the marketplace. Profit is a dirty word, blamed for most of our social ills. In the interest of something called consumerism, free enterprise is becoming far less free. Rights are being reduced, and even eliminated, in the name of environmental protection. It is time that voice is raised on behalf of the 3.2 million independent wage earners in this country, pointing out that profit, property rights and freedom are inseparable and you cannot have the third unless you continue to be entitled to the first two.

Even many of us who believe in free enterprise have fallen into the habit of saying when something goes wrong: “The government orta.” For example, we have recently witnessed the disgraceful spectacle of the iron ore companies appealing to the government to intercede in Japan. Similarly the sugar industry.

In any comparison between the free market system and socialism, nowhere is the miracle of capitalism more evident than in the production and distribution of food. The average Russian farmer is able to support one worker in the city. In Australia each member of the rural workforce frees over 12 individuals for the industrial workforce. Each Australian grazier/farmer feeds over 104 other individuals!

The biggest example comes, I think, when you compare the two super-powers. I’m sure that most of you are aware that some years ago the Soviet Union had such a morale problem with the workers on the collective farms that they finally gave each worker a little plot of ground and told him he could farm it for himself and sell in the open market what he raised. Today, less than 4 per cent of Russia’s agricultural land is privately farmed in that way, and yet on that 4 per cent is raised 40 per cent of all Russia’s vegetables, and 60 per cent of all its meat.

The American farmer is producing two and one-half times as much as he did 60 years ago with one-third of the man-hours on one-half of the land. If his counterparts worldwide could reach this level of skill we could feed the entire would population on one-tenth of the land that is now being farmed worldwide.

Today Americans are covered by tens of thousands of regulations to which are added about 25,000 new ones each year. In Australia the position is similar. A survey in January 1978, of 145 companies in Australia, found that 3 in every 4 said that staff resources devoted to dealing with Federal regulatory agencies had more than trebled in the past five years.

The Cost of Government Regulation
A study of 700 of the largest corporations in U.S.A. has found that if they could eliminate unnecessary regulations of business and industry, they would instantly reduce the inflation rate by half. Other economists have found that over-regulation of business and industry amounts to a hidden five-cent sales tax for every consumer.

The misdirection of capital investment costs the U.S.A. a quarter of a million jobs. That’s half as many as the President wants to create by spending $32 billion over the next two years. And with all of this comes the extra burden of government-required paperwork. For instance, President of the Eli Lilly drug company says his firm spends more man-hours on government-required paperwork than they do today on heart and cancer research combined. He told of submitting one ton of paper, 120,000 of scientific data most of which he said were absolutely worthless for FDA’s purposes, in triplicate, in order to get a licence to market an arthritis medicine. So, the United States is no longer first in the development of new health-giving drugs and medicines. They’re producing 60 per cent fewer than they were 15 years ago.

What about the banning of saccharin by FDA based on nebulous data, ignoring all the benefits for diet by obese people and diabetic people? It was estimated thousands would die without saccharin. FDA had to defer the banning after the outcry.

And it’s not just the drug industry which is over-regulated. How about the independent men and women of that country who spend $50 billion a year sending 10 billion pieces of paper to Washington where it costs $20 billion each year in tax money to shuffle and store that paper away? Governments in Australia are currently spending $14 million per hour, 8 hours per day, 5 days per week, $2 weeks per year!

Freedom
It all comes down to this basic premise: if you lose your economic freedom, you lose your political freedom and in fact all freedom. Freedom is something that cannot be passed on genetically. It is never more than one generation away from extinction. Every generation has to learn how to protect and defend it. Once freedom is gone, it’s gone for a long, long time. Already, too many of us, particularly those in business and industry, have chosen to join our government’s march to socialism rather than fight it. Often I am concerned that corporations have abdicated their responsibility to preserve the freedom of the marketplace out of a fear of retaliation, or a reluctance to rock the boat. If they have, they are feeding the crocodile hoping he’ll eat them last. You can fight Canberra and you don’t have to be a giant to do it.

The Small Businessman
In Kalgoorlie there’s a little company owned by a husband and wife (Ron and Lori Manners).

Working through the Chamber of Commerce, Ron Manners has produced a document called “Australia Lookin’ Good, Feelin’ Awful” (or you could call it “The Case for Governments Getting out of the Way”), and followed this up with a specific 15 step policy on how the government could best get out of the way or “release the handcuffs” as he terms it, from the Mining Industry.

It is impossible for Canberra to knock over the logic presented in these documents and more difficult for the government to reply to his demands for monthly reports on what progress they are making along these lines.

In the 12 months since publishing these documents Manners has been inundated with requests for copies as they are forming the basis of strategy for many other industries in other parts of Australia to push the case for deregulation of their various industries and regions.

They are using the same tactics as Manners in showing how every government intervention into peaceful private activity tends to make things worse rather than better.

By bombarding Canberra with logic in this fashion it is putting the bureaucracy on the defensive and making them think twice about erecting any more hurdles, so with a bit more pressure of this kind we could even have them dismantling some of the existing hurdles.

As Manners reminds them, “a predatory government, casting a pall of toxic uncertainty, will not revitalise investment in the Australian mining industry.”

Why don’t more of us challenge what Manners called the arrogance of officialdom? Why don’t we set up communications between organisations and trade associations, to rally others to come to the aid of an individual like that? Or to an industry or profession when they’re threatened by the barons of bureaucracy (who have forgotten that we are their employers)? Government by the people works when the people work at it. We can begin by turning the spotlight of truth on the widespread political and economic mythology that I mentioned.

Mis-education
A recent poll of university students found that the students believed that business profits in America average 45 per cent. This is nine times the actual average of business profits in America. It was understandable that the kids made that mistake, because the professors in the same poll guessed that the profits were even higher!

The most dangerous myth is that business can be made to pay a larger share of taxes, thus relieving the individual. Politicians preaching this are either deliberately dishonest, or economically illiterate, and either one should scare us. “Business” doesn’t pay taxes, and who better than business could make this message known? Only people pay taxes, and people pay as consumers every tax that is assessed against a business. Passing along their tax costs is the only way business can make a profit and stay in operation.

The Federal Government has used its taxing power to redistribute earnings to achieve a greater voting strength. Politicians love business taxes, because it hides the cost of government.

Stand United
To win this battle against Big Government, we must assist each other. We must support the doctor in his fight against socialised medicine, the oil and mining industry in its fight against crippling controls and repressive taxes, and the farmer, who is hurt more than most because of government harassment and rule-changing in the middle of the game. All of these issues concern each one of us, regardless of what our trade or profession may be. Executives must begin to realise that it has allies in the independent business men and women, the shopkeepers, the craftsmen, the farmers, and the professions. All these men and women are organised in a great variety of ways, but right now we only talk in our own organisations about our own problems. What we need is a liaison between these organisations to realise how much strength we as a people still have if we’ll use these organisations.

The Energy Problem
In regard to the oil industry, is there anyone who isn’t concerned with the energy problem? Government caused that problem while we all stood by unaware or uncaring that we were involved. Unnecessary environmental regulations and prices and imposed price limits back in the 50s are the direct cause of today’s crisis.

In Australia the position is bad enough, but it was the restriction by government of all forms of energy production in the United States (delaying the Alaska pipeline, forbidding the drilling of the Atlantic sea board, prolonging the time to build nuclear power stations, etc.) which caused the United States to turn from being an oil exporter to an oil importer. Because of the overwhelming effect of the U.S. economy on the rest of the world, this caused an oil shortage which allowed the OPEC nations to increase the price of oil fourfold, thus upsetting the world monetary and trade flows to the extent that we are now in deep depression.

With a fourfold increase in oil prices the oil importing countries (and this means most of the world’s big industrial nations) have to spend such a disproportionate amount of their foreign exchange on simply importing oil, that they cannot buy a normal amount of goods on the world’s markets — hence depression.

The oil crisis didn’t occur because of a shortage of fuel: it resulted from a surplus of misdirected government actions. Now the United States have a new energy agency of enormous power, with 20,000 employees and a $10.5 billion budget. That’s more than the gross earnings of the top seven oil companies in the United States. The creation of the Department of Energy is nothing more than a first step towards nationalisation of the oil industry.

The Need To Drill
While I believe no one should waste a natural resource, the conservationists act as if we have found all the oil and gas there is to be found in this continent, if not the world. Do you know that 57 years ago the American Government said they only had enough oil for 15 years? Nineteen years went by and they said they only had enough left for 13 more years, and Americans have done a lot of drilling since then and they’ll do a lot more if government will do one simple thing: get out of the way and let the incentives of the marketplace urge the industry out to find the sources of energy that all countries need.

Closer to home, the Australian Government forecast for years that Australia would be importing iron ore by the year 1965. When they finally lifted the ban on exporting iron ore in 1960 and allowed some people to peg for iron in some areas in 1961 there followed the development of the Hamersley Iron Field, (having caused a delay in its development for some 8 or 9 years since my discovery of the field in 1952), to the position today that Australia is now the largest exporter of iron ore in the world. This is a position we should be pleased with, considering we have to sell the product competitively on world markets, without tariff protection and despite considerable obstacles. Unfortunately this is a position we are about to lose due to competition from other nations with more reasonable industrial relations and more realistic governments.

Fed Up With Socialism
Surely we’ve had enough of social mythologists telling us the system they themselves have disrupted with their social tinkering or even government planning and management. They play fast and loose with a system that has given us what we enjoy today. It’s time we recognised that the free market system, no matter what our problems are, has never failed us once. Every time we have failed the system — usually by lacking faith in it, usually by saying we must have more government controls. The time has come, or really is overdue, for the wisdom, ingenuity, and resources of business to be marshalled against those who would destroy it.

What specifically should be done? The first essential for the businessman is to confront the problem as a primary responsibility of business management; to understand that the power of government rests not with the elected representatives of the people, but mainly with the giant central bureaucracies in Canberra and that their power and growth can only be restrained by putting a hatchet man in Treasury to cut down all department by an equal amount right across the board, sufficient to bring the budget into balance by the end of the normal 3 year life of parliament.

Let’s give the lie to Churchill’s statement [or is it Lord Birkenhead’s?] that he “thought the coal miners were the stupidest people in the world, until he met the coal owners.”

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