Of the many outstanding contributions that former Treasury Secretary Ken Henry made to public policy in Australia, one of my favourites was the wellbeing framework. This framework established Treasury’s goal as improving the wellbeing of Australians, and identified five elements of wellbeing: the level of consumption possibilities, their distribution, the degree of risk borne by individuals and society, the degree of complexity we face in our choices, and the level of freedom and opportunity we enjoy. I liked the framework because it made it clear that Treasury should consider a range of factors, in addition to the impacts on the Budget and the economy, when assessing or developing policy proposals, including social and environmental impacts. This is good economics, as social and environmental impacts should ideally be considered in any cost-benefit analysis of policy measures or projects.
So it is somewhat of a shame that Treasury is abandoning the wellbeing framework according to an article by David Uren in today’s Australian:
Treasury has abandoned the “wellbeing framework” that guided its strategy under secretaries Ken Henry and Martin Parkinson, and which looked beyond managing the economy to environmental and social sustainability, and is instead giving top priority to fixing the budget.
Current secretary John Fraser has released a four-year corporate plan that identifies the budget, lifting productivity and securing the benefits of globalisation as his department’s principal objectives. “I wanted to focus on the things where we can have an influence,’’ he told The Australian…
…The new plan, which is focused on the economic policy issues that Treasury directly controls, contrasts with the more expansive vision which Ken Henry introduced to the department he led from 2001 to 2011. Dr Henry described wellbeing as “a grassroots statement of our mission, encompassing market, non-market, material and intangible components”.
While it is unfortunate that the wellbeing framework has been dumped, at least the Treasury under John Fraser continues to focus on important objectives related to the Budget and productivity, and it is excellent that the Treasury Secretary has identified securing the benefits of globalisation as a principal objective.
It is becoming increasingly clear that many people in advanced economies are either missing out on or are unaware of the benefits of globalisation. While there have been job losses and business closures associated with globalisation, overwhelmingly there have been net benefits to Australians, through news jobs and business opportunities, and through lower prices in real terms for a wide range of products, including clothes, furniture, and cars. Alas, many people do not appreciate these gains and there is a growing backlash against free trade and globalisation, which is manifesting itself in support for political extremists and demagogues.
I was recently alerted to some interesting research by MIT economist David Autor and others regarding the relationship between trade exposure and political polarisation in the US. From the abstract of the working paper:
Has rising trade integration between the U.S. and China contributed to the polarization of U.S. politics? Analyzing outcomes from the 2002 and 2010 congressional elections, we detect an ideological realignment that is centered in trade-exposed local labor markets and that commences prior to the divisive 2016 U.S. presidential election. Exploiting the exogenous component of rising trade with China and classifying legislator ideologies by their congressional voting record, we find strong evidence that congressional districts exposed to larger increases in import competition disproportionately removed moderate representatives from office in the 2000s. Trade-exposed districts initially in Republican hands become substantially more likely to elect a conservative Republican, while trade-exposed districts initially in Democratic hands become more likely to elect either a liberal Democrat or a conservative Republican.
Like the US, Australia is at risk of rising polarisation and extremism. So it is good that the Treasury has a goal of securing the benefits of globalisation. It should re-litigate the case for free trade and globalisation, pointing out the many benefits that Australians have already enjoyed.
The Treasury Building, Langton Crescent, Canberra
Queensland Economy Watch 
Hi Gene,
It does seem to be a shame that wellbeing is no longer a key aim. But it also makes sense for them to focus on what they can do. You urge re-litigation of the case for free trade and globalisation. Can you expand on that, or give a reference to the original litigation?
Also, the MIT abstract suggests that trade exposed electorates are more likely to vote for conservative republicans or liberal democrats. Does this just mean that protectionism is really independent of the traditional left (democrat) -right (republican) categorisation? Or is it saying that conservative republicans aren’t economically right wing – only socially right wing?
Thanks,
John
Thanks for the comment, John. What I had in mind was that there was a lot of work and advocacy for free trade and cutting tariffs in the 80s and 90s, particularly by the productivity commission or the industry commission as it then was. I think economists need to continually make the case for free trade because there is a risk of populist anti-trade measures.
I think you’re right about protectionism being independent of the traditional divide. Recall for example the UK Tory party was split on free trade in the late 1800s and early 1900s and Churchill joined the liberals.
Gene do you feel “wellbeing” is being excluded here because it is harder to define in the context of free trade and has not been a consideration in free trade discussions. Agriculture it still the main sticking point to free trade around the world and is one of the great failures of the USA in particular, access to food would surely be the at the top of the wellbeing chart in most countries of the world.
Thanks for the comment, Glen. Yes it could be that the treasury officers feel wellbeing is a bit nebulous and difficult to define.
Hi Gene,
Just saw this:
The wellbeing framework always looked fairly well intentioned, but at the same time, half arsed – in two senses. As a framework it was vague and unclear. Why did ‘complexity’ turn up in there? And how was it unpacked? And whether or not it was a well developed framework, it was hard to see it having much impact on anything much. But you were closer to it than me, so perhaps you could tell us some areas in which it influenced Treasury’s agenda or policy inclinations and recommendations.
Thanks for the comment, Nick. As you’d suspect, It’s difficult to trace the real impacts that it had, but I always saw it as an important part of Ken Henry’s refashioning of Treasury away from a department of hard-headed bean counters to one that was more broadly engaged with not just economic but social policy issues, particularly in health and education. The Department’s involvement with the Cape York Institute was guided in part by Amartya Sen’s view of development as freedom and the wellbeing framework which tried to encompass Sen’s thinking.
I take your point about complexity being an odd inclusion, but there was a widespread view that our regulatory and tax systems were too complex, and this complexity was adverse to wellbeing in and of itself, not just because of its economic costs. I recall KH tried to inject some of this thinking into his tax review.
Gene, you say “Nick. As you’d suspect, It’s difficult to trace the real impacts that it had”. Well that sounds reasonable – but is it? It may have been having subtle effects that we don’t notice, but since it was a framework and all, introduced with some fanfare, wouldn’t you think that if you were introducing it as a way of recalibrating the way the Department thought about things you’d want to document even that – ie subtle shifts?
Certainly, that’s what you’d do if you were changing something as fundamental as your framework in some specific way. You’d want to be able to produce some evidence that you’d done that wouldn’t you? Don’t they say what gets measured gets done?
I’m afraid I also smell a rat with the Cape York malarky. The people I know who were involved in it – some sent there by the bureaucracy – speak of it as a bit of a Potemkin operation. I’m a great admirer of Noel Pearson’s essays, but I’ve never met anyone I respect who admires his administration at Cape York. The institute was, however, a pinup of a New Approach from all the serious folks who are invited into the Qantas Managers’ Lounge or whatever they call it these days. How much real curiosity did they show or help did they give others’ seeking to forge a new way that was consistent with their new framework? (I speak as one who was as chair of The Australian Centre for Social Innovation (TACSI).
I’m seriously not being snide here or taking any of this personally. I’m trying to argue the case I made above – that, although those involved would have described themselves and thought of themselves as serious, the proof of the pudding is in the eating and I’m afraid there’s not much to chew on – suggesting that however it related to people’s self-image, however well it was intended and/or received, knowing the tree by its fruits, it wasn’t really a serious exercise.
It was (I’m guessing) a workshop, some desk-research done by some aspiring grad, a charter of and some new words to put in the Department’s work and speeches. Lots of people would have been very pleased to see it – I was pleased to see it. And while those words are there, they did give a little encouragement, indeed licence to those within the Department and outside it if they want to fight the good fight (as they saw it).
But I can’t see much evidence of that fight.
I’ve love you to prove me wrong 🙂 I really would.
Dear Gene,
I am working at the Hong Kong Committee on Children’s Rights. I would like to know whether Treasury’s abandonment of the well-being framework has any effect on government’s policies related to children’s well-being, such as the government-funded Australian Child Well-Being Project 2012 – 2016 and the Child Well-being and Safety Act 2005.
Thank you very much for your information.
Best regards,
Shirley Wong
Hi Shirley, it wouldn’t have any impact. It was an analytical framework the department used. It is debatable whether it had any real practical impact. Thanks for getting in touch.
Hi Gene,
Thank you for your prompt reply. It is good to know that it wouldn’t have any impact, because we are searching for overseas examples that places child well-being at the center of children’s policies with clear frameworks and standards for evaluation and assessment. Thanks again for your information.
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