Stakeholder, Shareholder and Citizen: A different approach to the analysis and critique of democratic government
Fulbright Flinders University Lecture Series 1
Professor Howard Schweber Distinguished Chair in American Political Science
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Contents2 Welcome
4 FulbrightFlindersChairs
5 FulbrightatFlinders
6 ResearchInterests
7 WashingtonInternshipProgram
8 AmericanStudiesatFlinders
10 CollaborationsandPartnerships
11 LibraryCollection
12 FlindersUniversity
14 AdelaideandSouthAustralia
15 SupportofStateGovernment
16 OverviewofApplicationProcess
17 Research/Teaching
Welcome
Professor Michael Barber FAA, FTSE, FAICD Vice-ChancellorandPresidentFlindersUniversity
IamdelightedtopresentthelecturebyProfessorHowardSchweberaspartofFlindersUniversity’sinvolvementinhostingtheFulbrightFlindersUniversityDistinguishedChairinAmericanPoliticalScience.
FlindersUniversityisrenownedforitsstronginternationallinkswithuniversitiesandresearchinstitutionsacrossNorthAmericaandAsia,recentlyestablishingtheCentreforUnitedStatesandAsiaPolicyStudies.
TheFulbrightFlindersUniversityDistinguishedChairinAmericanPoliticalScienceenhancesAustralia’snationalengagementwiththeUnitedStates,anengagementforwhichtheFulbrightprogramhasbeensuchasuccessfulanddistinguishedinstrument.
Thelecture‘Stakeholder,ShareholderandCitizen:Adifferentapproachtotheanalysisandcritiqueofdemocraticgovernment’presentedbyProfessorHowardSchweber,thefirstFulbrightFlindersUniversityDistinguishedChairinAmericanPoliticalSciencesupportsFlindersvisiontobegloballyconnected.
TheFacultyofSocial&BehaviouralSciencesisproudtobethehostFacultyfortheDistinguishedChairprogram.Overthecourseofthisprogram,theFacultywillhostaseriesofdistinguishedscholars,eachcontributingtothecomparativepoliticalanalysisofAustraliaandtheUnitedStates,andeachaddingsignificantlytotheteachingandresearchprofileoftheFaculty.
Througheventssuchaslecturesandcolloquia,thesescholarswillprovideaninvaluableresourcetoundergraduateandpostgraduatestudentsacrosstheFaculty,andwillhelptofosterresearchlinksbetweenFlindersanduniversitiesintheUnitedStates.
AspartoftheDistinguishedChairprogram,aseriesofpublicationswillprovideaworthyrecordoftheworkofeachDistinguishedChair.Eachpublication,atranscriptionofalecture,willprovidearesourceforfuturestudents,andwillcontributetotheongoingdialogueandcooperationbetweentheUnitedStatesandAustralia.
Professor Phyllis Tharenou ExecutiveDeanFacultyofSocial&BehaviouralSciencesFlindersUniversity
EachoftheFulbrightFlindersUniversityDistinguishedChairsinAmericanPoliticalSciencewillmakeanimportantcontributiontothescholarshipontheUnitedStatesthatwecontinuetodevelopatFlindersUniversity.
WhileatFlinders,ProfessorHowardSchweberexploredtheideaofrepresentation,acoreconceptunderpinningbothAmericanandAustralianunderstandingsofdemocracy.InthislectureHowardpresentsthreedifferentmodelsofrepresentation,askingwhetherthe“CitizenModel,”themostdesirablemodel,istodayrealisingitsrepresentationalpotential.
Hepointstotheproblematicrolesplayedbymodernpoliticalpartiesandvotingsystemsindistortingthatideal.Electoralreformandpartyreform,heconcludes,arenecessary--informedasneverbefore,byaproperunderstandingofcitizenrepresentation.
Professor Don DeBats Head,AmericanStudiesFlindersUniversity
TheAustralian-AmericanFulbrightCommissionispleasedtosupportthepublicationoftheprincipalpubliclectureofeachoftheFulbrightFlindersUniversityDistinguishedChairinAmericanPoliticalScience.Eachofthesetalksbringstoawiderpubliceachscholar’sreflectionontheresearchwhichunderpinsthisdistinguishedchairprogram.
Eachscholarexpandstheiracademicexpertise,sharestheirknowledge,andstrengthensthenexusbetweenAustralianandU.S.stakeholdersthroughtheirresearchandanationallecturetouracrossAustraliawhichiscoordinatedbytheCommissionandFlindersUniversity.
Tangerine HoltExecutive DirectorAustralian-American Fulbright Commission
Contents03 The Concept of Representation: Mapping out Ways to Categorise and Critique Democratic Institutions05 Three Basic Questions about any Representative System11 Guiding Ideas for Australia: Locke and Madison14 The Problem is Political Parties16 Q & A
IntroductionMyresearchduringmystayinAustraliahasbeenaboutdemocraticrepresentation.Itstartedoutasastraight-forwardcomparativestudyofAustralianandAmericanpoliticalpracticesbutrapidlybranchedintoamoretheoreticalstudy:whatdowemeanbyrepresentation?Andwhatpurchasecanwegetonideasaboutdemocracy,democraticprocessanddemocraticpracticebyfocusingontheconceptofrepresentation?
Formanyreasons,democraticpracticeisahotissuerightnow.Insomepartsoftheworld,newconstitutionsarebeingwritten.Inothers,wholesystemsarebeingradicallyreformed.It’sprobablynotacoincidencethatinplaceswherereformisnothappening–suchastheUnitedStatesandAustralia–wefindextremelyhighlevelsofdissatisfactionwiththepoliticalprocess.Inotherwords,inplaceswheredeepreformingisnothappening,possiblyitshouldbe.
Professor Howard SchweberFulbright Flinders University Distinguished Chair in American Political Science
January–June2012
ProFESSor HowArD SCHwEBEr, MA (Chicago), PhD (Cornell)
ProfessorSchweberreceivedhisPhDinGovernmentfromCornellUniversityin1999andanMAinHistoryfromtheUniversityofChicagoafterspendingfiveyearspractisinglaw.Heteachescoursesfocusingonconstitutionallawandlegalandpoliticaltheory.ProfessorSchweberistheauthorofSpeech,ConductandtheFirstAmendment(PeterLangPress2003),TheCreationofAmericanCommonLaw,1850-1880:Technology,Politics,andtheConstructionofCitizenship(Cambridge2004),andTheLanguageofLiberalConstitutionalism(Cambridge2007),aswellasarticles,essays,andbookchaptersonavarietyofrelatedtopics.
Professor Schweber’s current areas of research include comparative analyses of different constitutional systems and theconstructionof“public”and“private”ascategoriesoflegalandpoliticaldiscourse.HeisamemberoftheBoardofDirectorsoftheWisconsinCenterfortheStudyofLiberalDemocracyandinthepasthasbeenactivelyinvolvedwiththeCenterforCivicEducation’sWethePeopleprogram.ProfessorSchweberisregularlyfeaturedonWisconsinPublicRadioprogramsandgivesfrequentnewspaperandtelevision interviews. In2004hewastherecipientoftheWilliamHKiekhofferAwardforDistinguishedTeaching.ProfessorSchweberhasalsotwicebeenselectedasthePiSigmaAlphaProfessoroftheYear,andreceivedtheStephenandMarjorieRussellAwardforOutstandingTeachingatCornellUniversity.
The idea of ‘representation’ is central to discussions of democratic government, economic organisation, and policymaking. Yet the meaning of ‘representative’ is subject to great disagreement: Who/what is represented? What is the activity of representation? What is the relationship between the representative and the represented?
Within a single system of democratic government, multiple versions of ‘representation’ are frequently at work. Applying classical models to modern political systems including Australia and the US, Professor Howard Schweber examines a different approach to the analysis and critique of democratic systems.
Stakeholder, Shareholder and Citizen: A different approach to the analysis and critique of democratic government
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Presentedby
Professor Howard Schweber
on29May2012
The Concept of representation: Mapping out ways to Categorise and Critique Democratic Institutions
fwethinkaboutdiscussionsonthetopicofdemocracycurrentlytakingplacearoundtheworld–forinstance,theEuropeandiscussionofdemocracydeficit,theEasternEuropeandiscussionsofdemocratic
consolidationandconstitutionaldesign,thevariousdebatesaboutthedemocraticorundemocraticrolesofelectoralsystems–intermsofthedeploymentofconceptionsofrepresentation,wearerewardedwithanaddedpurchase.Infact,wefindwaystothinkaboutcategorisingandcritiquingdemocraticinstitutionsthatwouldotherwisebenon-obvious.
Ifwethenturnthoseinsightsontoourowninstitutions,wemaybeconfrontedbyanimportantquestion:areourpoliticalinstitutionsservingusinthewaythatwewouldlike?Andtotheextentthattheansweris‘notentirely’,orperhaps,‘notatall’,howmuchisbecauseofacertaintensioninournotionofwhatwethinkrepresentationisaboutandaboutthewayrepresentationisactuallyundertaken.It’sworthnotingthatrepresentationisoneof‘those’words.Everybodywantstoberepresentative.
Allformsofgovernmentclaimtoberepresentative…andnotonlyformsofgovernment.Ifyouopenthebusinessjournals,they’refullofarticlesonbusinessgovernanceandtheroleofrepresentation:representationofinterests,representationofshareholders,representationofminorities,representationoflocalcommunities.Inmoderntimes,almosteverybodywantstobegovernedbyrepresentatives.
Everypoliticalgrouporcausewantsrepresentation,everygovernmentclaimstorepresent.Butthesametime,wearetroubledbythedifferencebetweenshamandrealrepresentativeinstitutionsandbythemanycompetingwaysrepresentationcanbeinstitutionalised. ‘representation’ goes all the way back to its Latin roots. while the Greeks had no word for representation, the Latin word ‘representare’ meant ‘to make present that which is absent’.Sorepresentationisalwaysaboutleavingsomethingout.It’snotonlyaboutwhatisincluded,it’saboutwhatisnot–andtheanalogyIlikeiscontainedinthisfollowingpassagefromSylvieandBrunoConcludedbyLewisCarroll,oneofthemostprofoundpoliticalthinkersIknowof.Thedialoguegoeslikethis:
‘That’sanotherthingwe’velearnedfromyournation,’saidMeinHerr,‘Map-making.Butwe’vecarrieditmuchfurtherthanyou.Whatdoyouconsiderthelargestmapthatwouldbereallyuseful?’
‘Aboutsixinchestothemile.’
’Onlysixinches!’exclaimedMeinHerr.‘Weverysoongottosixyardstothemile.Thenwetriedahundredyardstothemile.Andthencamethegrandestideaofall!Weactuallymadeamapofthecountry,onthescaleofamiletothemile!’
‘Haveyouuseditmuch?’Ienquired.
‘Ithasneverbeenspreadout,yet,’saidMeinHerr:‘Thefarmersobjected:theysaiditwouldcoverthewholecountry,andshutoutthesunlight!
‘Sowenowusethecountryitself,asitsownmap,andIassureyouitdoesnearlyaswell.’
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Amapisaperfectexampleofrepresentation:youdon’tincludeeverything,youchoosewhatisrelevant;andyouchoosedifferentthingsdependingonthepurposeforwhichyouaremakingyourmap.Economicmapsareverydifferentfrompoliticalmaps,whichareverydifferentfromterrainmapsoraltitudemaps,populationmapsoropinionmaps.Whenyouchoosetorepresentaterrain,youdosoonthebasisofhavingfirstdeterminedwhatyoucareabout,andthenleavingouttherest.Youcreatearepresentativeversionofthelandscapethatshowswhatyoucareabout.Inpoliticalrepresentation,thatisequallytrue.If we think of representation in terms of classic roman republican notions, in which freedom means not to be ruled by foreigners, the key is to be ruled by someone like ourselves, someone not foreign (however you define ‘not foreign’). That approach will lead you to map your idea of representation in certain ways. Soonesuitableidiom,ormetaphor,isthatrepresentationismap-makingandacriticalquestionisnotonlywhatyouwanttoleavein,butalsowhatyouwanttoleaveout.
Mysecondmetaphormakesexactlythesamepointinaslightlydifferentway:theideaoftherepresentativesample.Anyrepresentativesampleinvolvesfirstwhatwecalloperationalisingourvariables:figuringoutfirstwhatwecareabout,andthenfiguringouthowtomeasureandexpressit.Allofwhichisamatterofexcludinginformation.Andoncewe’vedecidedwhatwecareaboutandhowtomeasureitandhowtoexpressit,thenwemakeourrepresentativesample.
Therepresentationisnotthethingthatitrepresents,norisitdifferentfromthatthing.Ittakesaverystrangemiddlepath,amiddlespace,justlikeamap.Amapisnotthespacethatwearetravellingin–butit’snotdifferentfromthatspaceeither.Ifitwere,itwouldn’twork.
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Three Basic Questions about any representative System
Assoonaswestartthinkingaboutrepresentation(inanycontext,literary,artistic,cartographical,orpolitical)intermsofwhathastobeleftoutinordertomakeitwork,Ithinkwebegintorealisehowimportantthosechoicesare–andhowproblematicifinourinstitutionaldesignweareleavingoutthingsthatinournormativephilosophieswewouldactuallyprefertoseeincluded.Soletmetryandbreakthisdownalittlebitmoreconcretely.
Thethreebasicquestionsaboutanyrepresentativesystemare:
1 who (or what) is represented? Forexample,wemayrepresentidentities,or
interests;wemayrepresentworldviews,orpersons.
2 what is the activity of representation? Isitamatterofchoosingpeoplewhowillengage
indeliberationanddiscussiononourbehalf,orisitamatterofchoosingpeoplewhowillengageinbargainingonourbehalf?Dowehaverepresentativestomonitorwhatwedo,ortogovernwhatwedo?
3 what is the relationship between authorisation and accountability in the representative system?
Theusualdistinctionisdelegationvsagency. Areourrepresentativesentrustedtoacton
theirownjudgement,wisdomandoftheirownaccord,ordoweaskthemtobeouragentsandcarryoutwhatwewouldhavedone.Anddoweaskthemtoactforus,ortospeakforus?
Sotherearethreebroadaxesalongwhichwecanplacedifferencesinrepresentativesystems.HereIcanpointoutalternatewaysofthinkingthatyoumightnotordinarilyhavethoughtofasrepresentative.Buttheyareinfactexemplarsofextremecases.
ThenI’llmovetoaconsiderationofsomeclassicmodelsofpoliticalrepresentation,andfinally,applytheinsightsofthatdiscussiontoacriticalanalysisofthesituationinAustraliaandAmerica.Perhapsthatwillprovokeaquestion:justhowsatisfiedarewewiththefitbetweenourmapandthethingwethinkwearemapping?
The shareholder model
Youmaynotthinkofbusinesscorporationsasrepresentative,butthatiswhattheyclaimtobe.Decision-makinginapublicly-tradedcorporationis,explicitly,amatterofcollectingthewills,aggregatingthepreferencesofagroupofpeoplejoinedtogetherusingacertaincalculus,andbalancingoutwinnersandlosers.Thisdeterminestheboard,ortheexecutives,ortheCEO,whowillthengoontomakespecificgovernmentdecisions.Andthat’snotsomenovelinsight.Ifyougobacktothe19thcentury,whenbusinesscorporationsfirstemerged,thiswasexactlythenotion.TheshiftfromBritishCharteredCompaniestogeneralbusinesscorporations(whichreallybeganintheUnitedStatesinthe1850s,andlatertookoffinEnglandinthe1870sand1880s)isbasedontheideaofpullingcapitaltoallowprivategroupstodothekindsofpublicpurposetasksthatpreviouslyonlygovernmentscoulddobecauseitservespublicpurposes.Capitalwasorganisedinwhatwewouldnowcallarepresentativekindofway.
Railroadsweretheparticularenterprisesthatstartedallthisrolling.Butshareholdervotingisnotquitelikepoliticalvoting.It’snotoneman,oneperson,onevote.It’soneshare,onevote.Thephraseweusetoidentifywhat’sgoingonis‘votingyourshares’.Inotherwords,inthemostliteralpossiblesense:‘moneytalks’.Inashareholdersystem,whatisrepresentedismoney.
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Theshareholder,theactualpersonisreallythecarrier,orthevehicle,forbringingthemoneyintotheshares.Themoresharesyouhave,themorevotesyouget,themoreinfluenceyouhaveovertheoutcome.Ifyouthinkofthequestionback-to-frontitbecomes:howdidthepolicyofthiscorporationbecomedetermined?Theansweris:throughtheindirectrepresentationofthelargestblockofmoneyinvolvedinitsownership.Thatisnotintuitivelystrange,appliedtoabusinesscorporationbutthemoreyouthinkaboutitthemoreitbecomesinteresting.
Inthefirstplace,weassumetheauthoritytocontrolsomethingcomesfromowningit.Inotherwords,IshouldbeallowedtodecidewhatthiscorporationdoesbecauseIownmoreofit.Thissoundsintuitivelysensibleappliedtoacorporation–butwhatifappliedtoacountry?Ortown,orevenauniversity?Suddenlyyoumightbemuchlesscomfortablewiththeidea.
Wellnaturally,that’sbecausetheseareprivatebusinessentities,notpublicentities.Your comfort level changes when you realise we entrust private business entities with a huge range of public tasks.Thereareexplicitcasesofprivatisation:ofprisonsystems(inwhichAustralialeadstheworld,Imightpointout)andin
LatinAmericaprivatecompaniesthathavetakenoverthedrinkingwater.Wemightthinkoftheseobviouscasesaspublicgoodsunderprivatecontrol.Butalso,muchmoregenerally,theexistenceofaprivatebankingsystemmeansthatmassivelyimportantpublicfunctionsarecarriedoutbyprivatecorporationswhosepolicychoicesaremadeonthebasisthatmoneytalks.Inthemostliteralsense.
Toseethatnotiongivenfleshandwalkingaround,checkouttheUSSupremeCourtcasethatsaysacorporationhasfreedomofspeech.Whatmessagedoesacorporationexpress?Whatevermessagethelargestblockofshareswantstodeliverthroughitselectiverepresentativesontheboard.Doesthismatter?Youmaythinkbusinesscorporationsarerunforprofit,sowhoreallycareswhoisontheboard?Infact,itmattersanenormousamount.ItturnsoutthatwhoistheCEOinparticularmattersasmuch,perhaps,asitmatterswhoisthepresidentofacountry,orthepresidentoftheuniversity.
ArecentstudyjointlyconductedbytworesearchersfromHarvardandNYUisgettingagooddealofattentionbackintheUS.Ifinditabsolutelyfascinating:astudyofCEOs’behaviourcontrolledforoneinterestingvariable:militaryservice.
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It turns out that in the United States, over a 50-year period, CEos who had served in the military have very markedly different patterns of conduct than do CEos who had not served in the military.CEOswhowereveterancitizensshowlessthanhalftherateoffraud,financialmalfeasanceandcorporateirregularities.Theyperformmuchbetterduringbadtimesintermsofdiminishinglosses,althoughtheyshowmuchlessexcitingperformanceduringboomtimes.They’reriskaverse,they’recareful,theyfollowtherules.
Youmayconcludefromthatanythingyouwant:youmaythinkit’sagoodthingorabadthing.It’sjustoneniceillustrationofthefactthatitmatterswhocontrolscorporations.Andsoifyoubelievethatthecorporatesectorofoureconomyissignificant,youshouldthinkaboutthemannerinwhichthatleadershipisrepresentative,andofwhatitisrepresentative.Afterall,corporationsarenotnaturalobjects.Theyarecreaturesoflaw,createdbypoliticalentities.I’vealwaysloveditwhensomeonetalksaboutthenaturalrightsofcorporations.Ithasmescratchingmyhead–theyexistbyactsoflegislationafterall.
Sowho,andwhat,isrepresented?I’vesuggested–onlyslightlytongue-in-cheek–thattheanswerismoney.Whatistheactivityofrepresentation?Theunconsideredconsequencesofstructuraldesign(intheUnitedStatesatleast,Idon’tknowifthisistrueinAustralia)arethatifaCEOweretoactinthewaythatfailedtomaximisecorporateprofits,theshareholderscouldsue.Thisisnotamatterofagreementorsocialattitude;structurally,corporationsaredesignedforthepurposeofmakingaprofit,pullingcapitaltoinvesttocreateprofit.Thisisnotacriticism:that’swhattheyarefor.That’swhattheydo.Thismeansthatbystructuraldesign,theonlylegitimateactivityofbusinesscorporationsisthepursuitofprofit.Andthisisfine…untilyouconsiderthefactthatwe’retalkingaboutasystemrepresentativeofaverylargenumberofpeople’spensionfunds,forexample,orurbanbonds,orschoolbonds,orlabourunioninvestmentswithprofoundpolicyoutputs.
Thecorporationsarenotencouragedorpressured,they’rerequiredtoperformthatrepresentativeconduct,keepingonlyasinglelawinmind.Thisisavery,verynarrowandconstrainingmodelofrepresentationofeconomicinterests.
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Whatrelationshipistherebetweenauthorisationandaccountability?Almostnone.The notion of shareholders controlling corporate boards is, at least in the United States and (I suspect) here as well, something of a joke. Thevastmajorityofcorporatesharesareownedblind.Ihaveaninvestmentinaretirementaccount;myretirementaccountinvestsinanumberofmutualfunds;thosemutualfundsbetweentheminvestin,say,80differentcorporations.IfreelyconfessIhavenevereventriedtofindoutwhatwasgoingonatalltheshareholdersmeetingsofallthose80corporations.WereIGeorgeSoros,I’msureIwouldbehavequitedifferently,butthevastmajorityoftheinvestorsinthemarketaren’tGeorgeSorosanddon’tbehavelikehim.Sotheonlykindofscrutinyis,inpoliticalterms,internationalrelations:themarkets.Whatdocompetingcorporationslooklikecomparedtoyours?There’salmostnointernalgovernanceofcorporations,intermsoftheshareholderswhomtheyclaimtorepresent.
Manycorporationsdon’tworkthatway:creditunions,community-ownedorganisationsandworker-ownedorganisationsandlotsofother
corporateforms–butthestandardbusinessmodelofthepubliclytradedcorporationscontinuestousewhatoncloseexaminationturnsouttobearemarkablystrangemodelofrepresentation.Nowthisonlymattersinsofarasweinsistonascribingtoitarepresentativequality.Butwedo.
The Stakeholder Model
Whataboutadifferentmodel?Iftheshareholdermodelistoonarrow,ifweobjecttorepresentingonlymoneyinproportiontoitspresence,ifweobjecttotheconstraintofonlyseekingprofit,let’stryadifferentmodel.Attheotherendofthespectrumisthestakeholdermodel.JohnDryzek,fromtheAustralianNationalUniversityputsitthisway:‘collectiveoutcomesarelegitimatetotheextentthatallthosesubjecttothemhavetheright,capacityandopportunitytoparticipateinconsequentialdeliberationabouttheircontent.’Thisapproachisverybigindiscussionsoftransnationalgovernance,NGOs,non-electiveornon-politicalgoverninginstitutions,particularlyinEurope.
Theideathatthosewhoareaffectedbydecisionsshouldhaveasayinoutcomesisverypopularamongstpoliticalwritersandisattheoppositeextremetotheshareholdermodel.
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Theshareholdergetsasayintheoutcomebyowningapieceofthecompany,thestakeholdergetsasayintheoutcomebybeingaffectedbythecompany’sactions.one analogy I like is: would we like the rules of the road to be made by people who drive the cars or pedestrians? Careful,it’satrickquestion!
Sowhat’swrong,ifanything,withstakeholderrepresentation?Isn’tthatthesolution?Wemightsay,well,ifcorporationswanttodosomething,perhapsrepresentingstakeholdersistoomuchofastretch.Butifthegovernmentwantstodosomething,surelyanyonewhoisaffectedbytheoutcomeshouldhaveasayinit.Thisapproachcertainlyappealstoournotionoffairness,doesn’tit?Itgetsusoutoftheuncomfortableideaofarbitraryrule:beinggovernedbyactionsthataffectusoroverwhichwehavenocontrol.Forexample,bythislogicweoughtnottohavestrictrulesofcitizenshiprestrictingwhoparticipates.Ifyouliveinacountry,andifyouareaffectedbyitspolicies,youshouldbeabletovoteonthem.
Theproblemis,nobodymeansthis.Icanprovetoyouthatnobodymeansitwithaverysimpleexample:someoneinthecountryforaperiodofyearswhomyouwouldnever,everwanttoparticipate:foreigninvadingtroops.
No one says that foreign invading troops should be able to vote in the elections of a country they’re invading, even though they might be there for a period of years. Noonereallymeansit.Noonereallythinksourtradingpartnersshouldhaveasayinoureconomicpolicies.If,forexample,oneofourtradingpartnershasapopulationof1.3billionandourownpopulationishoveringsomewhereonthe25millionmark–noonereallythinkstheeligibilitytovotetodetermineAustralia’seconomicpolicyshouldincludealladultChinese.Sowedon’treallymeanthat,right?Notreally.Wedomeansomething,though.
Andwhatwedomeanpushestowardthenotionthatsomethingotherthanjustthepeoplewhoownashareinthecompanyshouldberepresented.Forexample,therearepeoplewhotalkaboutwaystorepresentfuturegenerations.Somehowincorporatingfuturegenerationsintoourpolicy-makingprocesswouldbeagoodthing,normativelyspeaking.Therearepeoplewhoargueweshouldincorporatenon-humaninterestssuchasnatureandtheenvironment.Themorethingsyouwantyourmaptoinclude,themoretherepresentationofthosethingsbecomesdifficulttopindown,andslippery.
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Andinfacttheseideasarenotalwaysrecognisedforwhattheyare;itcertainlyseemstomethatiftherearepeoplewhotalkaboutrepresentingfuturegenerations,thereareevenmorepeoplewhotalkaboutrepresentingpastgenerations.
Everytimeyouheartheappealtotradition,whatweowetoourancestors,orhowtheconstitutionshouldbeunderstoodinits‘originalsense’,whatyou’rehearingissomeonespeakingonbehalfofthepast,whichisnotunreasonable,butit’snotobviouseither.
A citizen-focused model
Sobetweenshareholdersandstakeholders,nobodyreallymeanseithermodelinitspureform.Noonereallythinksweshouldhavenopublicregulationsovercorporations,noonereallythinksthateveryoneaffectedbyeconomicdecisionsshouldhaveasayintheoutcome,notreally.Butthesetwowordsdoidentifythesetwopolesonaspectrum.
Andsomewhereinthatspaceinbetween,wehavecitizens.It is the citizens we really care about when we want to decide who will be allowed to participate in political decision-making in a state that is backed by its potential to use coercive force. Wewantthisparticipationtohappeninawaywewillrecogniseasdemocratic,orliberal,orlegitimate.Thatstatement,ofcourse,raisesthequestion:isourownsystemlivinguptothosedemands?
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Guiding Ideas for Australia: Locke and Madison
Andtoattempttoanswerthatquestion,wecanlookatthiscountry.Australiawasformedattheendofthe19thcenturyandtheguidingideasofthatformationarethoseoftheEnglishandAmericanwritersofthe19thcentury.
LetmereadyouashortquotationfromJohnLocke,probablytheparamountfigureinAnglo-Americanliberalphilosophy:itallgoesbacktoLocke’ssocialcontract.‘Legitimategovernmentisgovernedbyconsent.Thatgovernmentislegitimatewhichgovernsbytheconsentofthepeople.’Lockesaidtheindividualchoosestobepartofthestatebecauseitserveshisorherinterest.ThisisbedrockstuffforanyAnglo-AmericanpoliticaltheoristanditwasverymuchinthemindsoftheframersoftheAustralianconstitution.ButLockehadaverystringentnotionofwhatrepresentationwasabout–andit’snotonewefindparticularlyfamiliar.The thing Locke was most afraid of was that representatives would come into office with prior commitments.HewasmostafraidthatsomeonewouldcomeintoParliamenthavingsaid‘Ipromisetovoteforpolicyxorpolicyy’.Ifthathappened,saidLocke,it’sover–andyou’llfindyou’rehavingarebellionbecauseyouhavecorruptedyourCommonwealth.
SpeakingabouttheExecutive,theKing,here’showheputsit: ‘Heactscontrarytohistrust,whenheemploystheforce,treasure,andofficesofsocietytocorrupttherepresentatives.How?Byopenlypre-engagingtheelectorsandprescribingtheirchoices,thosehehas,bysolicitations,threats,promises,orotherwise,wontohisdesigns.
‘Whyisthatcorruption?BecausethepeoplewhochooserepresentativescoulddoitfornootherendbutthattheymightalwaysbefreelychosenandsochosenfreelyasthenecessitiesoftheCommonwealthandthepublicgoodshoulduponexaminationandmaturedebatebejudgedtorequire.Thosewhogivetheirvotesbeforetheyhearthedebate,andhaveweightedthereasonsonallsides,arenotcapableofdoingso.’our democratic system is based at its core on a philosopher who said the whole thing fails if anybody ever makes a campaign promise.That’sit,it’scorrupt,it’sover,it’snotdemocracy.Giveupandhavearebellionandstartover.Thelegislature,thesouloftheCommonwealthhasbeencorruptedandfailed.Why?RememberthosethreequestionsIaskedatthebeginning:Whoorwhatisrepresented?What’stheactivity?What’stherelationshipbetweenauthorisationandaccountability?
Well,Locke’smodelofrepresentationis,firstofall,purelydeliberative.Theactivityisfree,patientdeliberationwithnopreconceivedcommitments,focusedonlyonthequestion:whatdoesthegoodoftheCommonwealthrequire?Whomorwhatdotheyrepresent?TheCommonwealth,thiscollectiveentity.Sothesecondformofcorruptionwouldbeanythinglikealocalrepresentation,suchasfederalism.Representingthiscityorthatstateisanathema.Lockeisnotactuallyveryclear,hespeaksofelectionsbutultimately,thisgoesbacktowhatjustifiesrebellion.He’splayingwithliveammunition,ifIcanputitthatway.
Lockelaidoutwhat,inhisview,aretheminimumconditionsforacceptabledemocracy,andtheyare,ifyouthinkaboutit,widelymoredemandingthananythingwetakeseriouslytoday.Whichisinteresting.
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It’snotasifLockewasunfamiliarwithhowthingscangowrong.HelivedthroughoneEnglishrevolution,andhadmemoriesofamuchbloodieronenotthatlongbefore.ThisisnotaphilosopherlikeDescarteswhowrotehisphilosophylyinginbedinhispyjamas(Ialwaysthinkthatwasagoodjob).Butthat’snotLocke,hewasinthethickofit.
That’sonemodel,averypuremodelofunentrammelleddeliberation,byapersonwhoseonlygoalistospeakforthegoodofthewhole.Let’sjumpforwardalittlebit.At the opposite extreme is James Madison. Madison tried to make democracy safe for the unvirtuous. Ifweknowthatpeoplearegreed-driven,vocal,contentiousandsometimesdishonest,howcanwenonethelessmakedemocracywork?Theanswerisbybalancingthebranchesofgovernmentagainsteachother,balancinginterestsagainsteachother,balancingfactorsandsoon.HowdoesMadisontacklethisdiscussion?
Inacoupleofways:firstofall,MadisonmadeapointthatIfindcentralbutisoftenoverlooked;whichis,thatinanysystemofgovernment–andforthatmatterinanysystemofanycorporation,anycivicassociation,andmostsocialorganisations–there’smorethanoneideaofrepresentationatworkatatime.
Wedon’tjustbalanceinterests,webalancemodels.Forexample,intheAustraliansystemthejusticesoftheHighCourtarenotelecteddirectly,buttheyareindirectlyelectedbecausetheyareappointedbypeoplewhoareelectedandwhomaypayapoliticalpriceforappointingpeoplewhomtheirelectoratesdislike.
Inmoderntimes,aswemoveawayfromtheeraofRoyalinvolvement,thegovernmentisappointedbyconsentofthePrimeMinister,whoisthestandingembodimentofresponsiblegovernment:averydifferentbutequallyimportantformofrepresentation.
Howdoyouchoosethisgovernment?Well,yourSenateandyourHouseusedifferentsystems.Thereisthefederalsystem,representationoflocalitiesandtheSenate,representationofpopulation:eachofthoseisrepresentingadifferentthinginadifferentway.That was Madison’s insight. You design a government by deliberately using different kinds of representation and balancing them against each other. AndthereasonthisworksisbecauseofwhatGordonwouldcallthehomogeneityofpower.
IntheBritishsystem,thedifferentpiecesofgovernmentrepresenteddifferentpiecesofsociety:theLords,theCommons,theChurch,theCourt,eachrepresenteddifferentpiecesofthesociety.
James MadisonJohn Locke
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TheAmericanassumptionwasthatallpowercomesfromthehomogenous‘people’,whichmeansthatalldistinctionswithinthegovernmentareartificial,andartificialbydesign.Youchoosehowyouwanttohaverepresentationorwhatyouwantrepresented,andyoualsochoosehowtobalancethemagainstoneanother.Madison’shugeandcriticalinsightwasthatnoneofthisisnaturalorgiven,noneofthisisdictatedbythesociety.Wemakeitandwhenwemakeitweshouldbecognisantofwhatwearebalancingandweshouldtrytohave(andhewasveryexplicitaboutthis)differentformsofrepresentationtobalanceoneanother.Unfortunately, Madison got it wrong. His view was that the House of representatives would be full of high-minded people who would represent the common good, while the Senate would be the place where local and parochial interests were heard.It’shardtogetitmuchmorewrongthanthatintheAmericancase!
ThecleanestarticulationofthisbalancingactwasWalterBagehot’sexplicitdescriptionofresponsiblegovernment,in1872.WhatisstrikingaboutbothBagehotandJohnStuartMill,writingataroundthesametime,isthattheymakeaveryimportantmovethatgoesbacktotheMadison-Lockedistinction.
Madisonwasallaboutbargainingofinterestsandpolicy-makingandrules.Lockewasallaboutthefreediscussionofwhatisgoodforthepeopleanddeliberations.Bagehot said: ‘we’ll have both – and we’ll separate them. Government will be carried out by experts. A government is formed.’
PeoplewithBritishheritagelikeBagehotandMillusetheword‘government’inastrangewaythatconfusesAmericansnoend.Thegovernmentisformedoutofthedemocraticrepresentativebody,nottoit.Thegovernmentisactiveandmakesdecisions,itdoesthings.Therepresentativebodydeliberatesaboutthem.Australiahasthisamazingmixedmodelusingpiecesofalltheothermodels.Forinstance,youhavetheAmericanfederalistideaofrepresentingstates.Whystates?Ifyouthinkaboutfederalism,thefamouslineintheAustralianconstitutionaldebatewas‘eitherfederalismwilldestroyresponsiblegovernmentorresponsiblegovernmentwilldestroyfederalism.’TheAmericanpoliticalscientistVOKeyputitalittlebitdifferently.Hesaid:‘partyisthesolventoffederalism’.
Ithinktheywerebothwrong.Youhaverepresentationofstatesandrepresentationofthepeople–butthenyoualsohaveadividebetweendeliberativebodiesandactualgovernance,andindirectcontroloverallofthem.Andallofthatisfine.
James Madison
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The Problem is Political Parties
Iwanttoproposeachallenge.InboththeAmericanandtheAustraliancase,somethinghasgoneterriblywrong.Andthethingthathasgoneterriblywrongisparties.
NowIcouldbephilosophicallypureaboutthisandpointoutthatforeitherMadisonorLocketheideaofapartyisabsolutelyanathemainademocracy.ForMadison,itwascriticalnottohavefactions.Theirabsencesavesusfromfallingintoviolenceandconflictbecausemyallytodaymaybemyopponenttomorrowandviceversa.Shiftingalliancesofinterestareapositivething;ifwehaveabigenoughcountry,we’llprotectitagainstthedangerofcapturebyoneparticularinterestordominationbyaparticularclass.Theinterestskeepshiftingbecausethecountryisbigenough,andpluralenough,thatthereisalwayssomeotherlineofcleavageonthebasisofwhichanalliancecanbeformed.
ForLocke,theideaofapartyisallaboutpartydiscipline.Partydisciplinesaystopartymembers:we’lltellyouwhatyouarefor.Millhatedparties.‘Partiesarenotmajority-ruled,partiesareruledbyamajorityofthemajority,whichalmostalwaysisaminority’,hesays.Whatcontrolstheparty?Themajorityoftheparty.Thepartymightbeamajorityofthevotersbutthemajorityofthemajorityalmostcertainlyisn’t.
Howextremedoesthisbecome?well, one of the really important things that parties do is select the candidates for whom we will vote.IntheUS,thepartieshavecontrolovertheprocessbywhichwechoosewhowillbe,ineffect,thetwocandidates.ThepartiescontrolwhowillbethetwochoicesforleaderoftheFreeWorld.Andthat’sprettyimportant.Ifyoucontroltheagenda,ifyoucontrolwhothecandidatesare,you’vegoneafairwayinto
controllingwhothewinnerisgoingtobe,oratleastyou’venarroweditdowntoaveryspecificrange.Whoinbusinesswouldn’tlovetobeabletosay,‘youhavetwochoicesandoneofthemismine’?That’saprettygoodenvironmentinwhichtowork.Thisyear,VirginiawasoneofthecriticalstatesinvolvedinchoosingaRepublicancandidate,andthepercentageofeligiblevoterswhoparticipatedinthatdecisionwas5%.FivepercentofeligiblevotersinVirginia,acriticalandpivotalstate,participatedinthedecisionastowhowouldbeoneofthetwocandidatesfortheleaderoftheFreeWorld.
...And voting systems
Yourresponsemaybe:‘InAustraliaourturnoutsarearound90%,becauseit’smandatory’andIamactuallyquiteafanofmandatoryvoting.Andyouhaveamarvelloussystemofproportionalrepresentationthatensuresthatallvoicesareheard.Evensmallpartieshaveachancetobeheardandhaveafewseats.Despitethisopportunity,90%ofyouvoteabovetheline–votingforwhomthepartytellsyouto.And the party takes your second, third, fourth and fifth preference choices and negotiates them with the other parties.I’mnotsuggestinganyofthisisevil.Itmightbe,itmightnotbe(that’suptoyou),butwhatIamsuggestingisthatitdoesnotfitanymodelofrepresentation;neitheroftheclassicmodelsIhavejustdescribednoranymodelthatyoucouldarticulate.
AustraliahasnotyetreachedthelevelofdysfunctioninpoliticsthatweseeintheUnitedStates,butyouarewellonyourway.LetmeaskyoutolookattheUnitedStatesasacautionarytale.TheUSisnotatrivialdemocracy,butalarge,importantcountryandmanystudiessuggestthesystemisliterallybroken;brokentothepointthatitsdysfunctionalityisunlikelytoberepairedanytimesoon.
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AtthebeginningofthistalkIsuggestedthatthosecountrieswherenothoughtisbeinggiventosignificantreformarecountriesthatshowveryhighlevelsofdissatisfaction.AndtheUnitedStatesisaperfectexample.Ourelectoralsystemislunatic.Werewardandencourageparticipantsintheverysamestructuralwaythatashareholder-ownedcorporation,drivenbyalegalobligationtopursueprofit,mustpursuecertainlinesofresponsivenesstocertainkindsofinterests.Thisisnotacriticismofcorporations;that’showtheirsystemisbuilt.Americanpoliticalpartiesarebuiltinthesameway;theyhavetopursuethemostextreme,mostdivisive,mostangry,mosthostileandthemostparanoidstyleavailableinAmericanpolitics.Theyhaveto.
Idon’tthinkthatparticulardiseasehasinfectedAustralianpolitics.Whatyouhaveinsteadisadifferentdisease.Parties, or any institution large enough, are given enough control over the process to pursue their own interests – which may have simply nothing to do with the interests of those it claims to represent.
Representationiscentraltothewaywethinkofdemocraticpolitics.Whenwethinkofrepresentationinaseriouswayweimmediatelygainacriticalpurchaseonpoliticalpractices,becauseweare
confrontedbythequestion:areweleavingoutthethingsthatwewanttoleaveout?Andthemapmetaphorperhapshelpsusseethat.Itletsusorganiseourthinkingaboutthatbasicproblemofwho,andwhat,isbeingrepresented?Whatistheactivityofrepresentation?Whataretherelationshipsofaccountabilityandauthorisationthataredrivingthissystem?Weallliveinsystemsthatclaimtobebasedonasetof19thcenturywritersandyetatthesametimeweliveinsystemsthathaveabsolutelynothingtodowiththosephilosophiesweclaimasourheritage.
Ifwedorecognisetheobviousandratherblatantinconsistenciesbetweenthetheoriesthatweclaimasexplanationsforhowwebehaveandwhatweactuallydo,andifwefocusparticularlyontheroleofpoliticalparties,wethenhaveagoodplacetostartourthinkingaboutwhatwewouldwant(orneed)tochangeinordertogettoamoreinternally-consistentnotionofrepresentation.Andbeyondthat,toareformofourdemocraticsystems.
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Do you think there is a life cycle to democracy, or at least the democracies that we have developed? That there is a point at which we
are just so complex that we begin to atrophy? Because really, what alternative do we have other than to just stick with the system we currently have?
WhentheSovietUnionfell,therewasawholeburstofliteratureaboutdemocratization.Andthensomethingshockinghappened.Alotoftheseplacesbegantoceasetobedemocraticandbegantogobacktobeingauthoritarianandtherewasanewburstofliteraturecalleddemocraticconsolidation.AndthenassoonaswegotareallygoodcropofPhDthesesonthattheory,thecolourrevolutionsstartedup,inUkraine,inGeorgia,andsoon.Sotherewasawholenewtheoryaboutcycles.Idefinitelythinkthereissomethingtowhatyouaresaying.
ButlookattheUS,whichismucholderthanAustralia,afterall.’Backintheday’isn’tthatlongago.Therewasmassivereconstructionaround1870andonlyslightlylessmassivereorganisationandreconstructionofthegovernmentinthe1930s.That’snotancienthistory.Idonotfinditunimaginablethattherewillbeasubstantialreconstructionofthesystem,ofelections,ofrepresentation,uptoandincludingasystemofnationalelections.Idon’tfinditunconceivablethatthosethingscouldundergosignificantchangeinmylifetimeandcertainlyinmychildren’slifetime.Soyes,thereisanaccretionofcomplexity,ofgamesmanship,ofconstituencies,ofinterests,ofpeople.Yougettoapointwhereeverybodylosesifanythingmoves.SoIagreewithyourdiagnosisofthestateofaffairs,butIdon’tnecessarilyshareyourpessimismabouttheimpossibilityofchange.
A question tied in to the shareholder model and required voting vs voluntary voting. People who are supposed to be represented
on the map have a choice of whether they actually want to be on that map or not. So you as an investor in a mutual fund could go find out what the 80 companies are, then go harass your mutual company who would be an institutional investor. Equally, I could vote if I choose.
It’sarelevantpoint.TheanswerastohowitfitswithwhatIwastalkingaboutis:itdoesn’t,justbecauseIwasn’ttalkingaboutthat.Butcertainlyyouareright.Ialwaystalkmoreintermsof‘whenwesetuptherules’,howyouexercisethatchoice.Wecanonlymappossibilitiesofchoice.Butletmepointoutthatthetransactioncostsinwhatyouaredescribingareimmenselyhigh.IcouldfindoutexactlywhatinvestmentIhave,butitwouldbemorethanafulltimejobandIwouldprobablyneedtrainingtodoit.
Youarerightaboutthevoluntarychoicetovote,ornotvote,butthereareverypowerfulmechanismsthataffectthatchoice,fromthingsassimpleasthefactthatwevoteonworkdaysandpollscloseat7pm,tothingsascomplicatedasregistrationprocedures,eligibilityrules,theavailabilityofinformationaboutthecandidatesandtheirpolicies,ortheeffectsofmediaasconveyorsofinformation,conveyorsofmisinformation,orcreatorsofinformationoverload.Myveryshortansweris:Ifindcompulsoryvotingpreventstheemergenceofhighlyunwholesomestrategicactionsdesignedtosuppressvotinganddiminishenthusiasm.
Q & A
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If representation is a construct, a design, a map that can either include or exclude, then, in our design, should we not think about
the purpose? Surely there is scope for us to completely reframe democracy and governance in the interest of a sustainable future.
Ofcourseit’spossibletothinkaboutcompletelyrestructuringdemocracy.Ihappentothinkits…utopianismmakesmyfeetitch!Weneednotbeutopian,oreventhinkasbroadlyasthattorecognizesomeconsequences.InthecaseoftheUS,youcandefinethreedistinctphasesofunderstandingwhatcorporationsarefor.
Thefirstpurposewastolaunchlargescaleendeavourswithoutendangeringthepublicthroughastrategyofallowingprivatepeopletopoolprivatecapital.Thatwasthedrivingpurposebehindwhatbecamethebeginningsofmoderncorporationlaws.Inthesecondperiod,let’scallitfromWWIuntilthe1950s,corporationswereavehicleforprivateprofitandpublicprosperity.Itworked–theyareamongstthemosteffectivemodesofsocialorganisationseverdesignedbymankindforaparticularsetofpurposes.Theyhelpprovidejobs,goodsandservices.Sointhesecondphase,wethoughtofcorporationsasvehiclesforgrowthandspreadingprosperity.
Startingfromthe1960sforward,weneededasecureplacetoparkcapital,ratherthangrowit.Theideathatthestockmarketisn’tsecure,whichmakesstockanalystsjumpoutwindows,atleastthewiserones,wasaroundevenbeforetheGFC.Buttheideabecamethatwhilethestockmarketofcourse,hasitsupsanddowns,overasufficientlylongtermitisastablegrowthplace,andagreatplacetoparklongtermsavingsandsocialobligationslikepensions.
Whicheverofthosebroadly-describedpurposesyoufavour,you’relikelytohaveadifferentviewofhowtheyoughttobegoverned.Soshouldtherebestrictrulesrestrictingrisksandinassistingcorporationsaswellasbanksmeetingcapitalisationratios?Andaboveall,wemustbesurethatentrepreneursareabletoraisecapitalandtakerisksandtakechances,andlose.ButIthinkweallagreethatthethirdmodel,thesecuresavingsmodel,that’satoo-big-to-failmodelandthere’saproblemwhenyoucombinethatmodelwithveryhighrisk-takingactivity.Withoutre-conceivingdemocracytoutcourtandatamuchmoreconcretelevel,wecanthinkaboutpolicychoicesintermsofthisnotionthatrepresentationdoesrelatetothepurposesthatit’ssaidtoserveandmovefromtheretoareformratherthanarevolution.
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inspiring achievement
CRICOSNo.00114A
flinders.edu.aufulbright.com.au
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