Coronavirus: Pragmatic leaders build a bridge to the other side

Whether we live or die, and what comes after the crisis, depends profoundly on the quality of government we produce, not the quality of ideology.

Josh Frydenberg and Scott Morrison present a united front. Picture: AAP

We’re working on the road out, not just the road in.

— Scott Morrison on Friday

In terms of Liberal-National tradition, conservative ideology and the true faith of Australian centre-right politics, John Howard, the pope emeritus of conservative politics, gave the papal blessing to Josh Frydenberg in a telephone conversation on Saturday, March 28.

The Treasurer was preparing the $130bn wage subsidy, the biggest fiscal intervention in our national history.

Howard told him: “Josh, there are no ideological constraints at this time.”

No ideological constraints.

This was already the ethos of Morrison, Frydenberg and Health Minister Greg Hunt. They are three ministers who, with the premiers, have shaped the national response to the pandemic. The can-do/must-do ethos is right for this coronavirus crisis. It will also have profound and permanent effects on Australian politics, especially Liberal-National politics.

Ideology is out. Results are in.

Morrison knows he will be dealing with a traumatised, damaged economy after the pandemic eases. He sees the task then as resembling postwar nation building.

The Australian government’s performance in this crisis has already been staggering, proactive, of an almost unbelievable scale and, despite some inevitable mistakes, strikingly effective so far.

Consider: Australia has the highest per capita COVID-19 testing regime in the world. On February 1, against the advice of the World Health Organisation, Australia became the first significant nation to ban direct travel to and from China, apart from Australians returning. The disease originated in Wuhan. All the people who would have come without the ban bear no blame, but many would have carried the virus. On its own, this decision could turn out to have saved thousands of lives.

Again against the judgment of the WHO, Canberra declared the virus a pandemic before almost anyone else. In the national cabinet, involving federal, state and territory leaders, Australia has produced the most unified response of any federation.

Strict social distancing applies across the country. The government began surging our health system in January, before we had a single confirmed case.

The course of this disease is unclear and optimistic signs must be tempered by terrible unpredictability. But as of now, these measures mean we have one of the world’s lowest death rates and one of the lowest infection rates in the developed world — a staggeringly low rate compared with other countries with such intense interaction with China. There are encouraging, but only provisional, signs the infection curve is flattening, which gives our health system a fighting chance of being able to treat everyone who gets seriously ill.

Of course, things could still go badly wrong, but if Morrison brings this off he will deserve the thanks of a nation and he will have immense authority to shape Australia’s course on the other side of the pandemic. He will need to be just as non-ideological, just as pragmatic, then as now. The tired old rhetoric of free markets everywhere and free trade always, will not answer the needs of a country that will have to get itself back to work, rebuild a manufacturing industry, especially in vital medical and strategic industries, and reduce its gravely dangerous dependence on China.

Morrison believes key conservative values reside in national sovereignty, national independence, economic prosperity. Too much political argument, he thinks, is about process and not outcomes. Free markets exist to serve an economy and a society, not the other way around. The government is not rejecting a preference for free markets or free trade, but the question is: what works in the circumstances we now confront?

Much the government has done, much of what it will need to do, has defied the centre-right orthodoxies of the past 35 years.

Frydenberg and Hunt have delivered in key areas by defying orthodoxy.

Frydenberg told Inquirer: “We knew the scale of the wage subsidy would be enormous. When I got the first costings from Treasury I said: ‘Oh my goodness.’

“I was very focused on delivering the response that was needed at the time. I make no apology for spending big when it’s needed most.”

Like Morrison, Frydenberg is actively working out what should happen “on the other side” of the crisis. He stresses, as Morrison has done, that the huge spending items the government is engaged in are “not permanent”.

But there will be some permanent changes, he told me.

“We will need to have a global conversation about supply chains and our need to provide for ourselves in a time of crisis. As a nation we must be able to provide for ourselves in the areas that are needed at times of severe economic stress and disruption. We are more than self-sufficient in agriculture. We are less self-sufficient in manufacturing and we will need to examine that in certain areas. Of course we can’t build everything in Australia. It requires a balanced approach.”

Frydenberg and Morrison work well together and have presented a completely united front on the economy. Both talk of “fighting a war on two fronts” — the pandemic and the economy. Both stress the need to keep businesses going “to build a bridge to the other side”.

Although Frydenberg is understandably cautious in declaring sweeping new economic doctrines, the need to expand manufacturing, and to take more control of supply chains, is explicit. The Australian community will demand no less, and if the Morrison government doesn’t do it, Labor will.

The Australian people are dogmatic on only one matter — their utter rejection of dogma. They embrace only one theoretical proposition — all theory is junk. The times could suit centre-right governments that pragmatically emphasise results and building national capacity.

Traditionally, such thinking would meet a lot of dogmatic opposition in the Treasury Department. But the Treasury mandarins must realise the old theories no longer work. In any event, it is the government, not the mandarins, who must make fundamental decisions about our national direction.

Resources Minister Keith Pitt told Inquirer that like everyone else he was totally focused on the crisis at hand, but that after the health crisis passes, as well as the resources sector, “we must also focus on delivering new and expanded downstream refining, manufacturing and production in a post corona environment”.

“We can become more self-sufficient through local manufacturing, by making more of our abundant natural resources.”

To achieve this redirection of the economy will require intense, proactive government leadership. Morrison’s energy, and his understanding of the task as akin to postwar nation building, are promising.

But this also goes right across the whole government. After Morrison, the most important person in responding to the health crisis, as a health crisis, has been Hunt. Last week he effectively nationalised private hospitals.

Naturally, this is only temporary. But the nationalisation itself goes against all previous centre-right doctrine, and was opposed by lots of stakeholders and lots of policy purists. Hunt wasn’t delayed by that for a nanosecond. And it was the right move.

Two immediate lessons emerge. It was possible to add the private hospital capacity to the fight against COVID-19 only because Australia has a vibrant, world-class private health sector to complement its government-run health system. And second, it was possible only because the national government took decisive, in its way radical, action.

“Bringing the private hospitals into a unified national system may perhaps be the most significant thing I will ever be involved in,” Hunt told me.

“It has meant 34,000 extra beds and 57,000 additional nurses will be brought into the fight against coronavirus. It also means all the private hospitals will be available both through and after the pandemic to help protect and treat Australians and help them survive.

“The private hospitals will become non-profits for the moment but most importantly they will be available through the crisis and on the other side of the crisis when they will be needed to catch up on pent-up demand.” (The pent-up demand arises from the temporary suspension of elective surgery.)

This is a textbook illustration of effective national mobilisation.

Hunt believes Australia’s pandemic planning was “world’s best” but adds that “we’ll take that to a new level”. He expects the pandemic to lead to significant social change. He also makes the dolorous but surely central point that the world will still be vulnerable to pandemics after this one has gone. Therefore, he says: “We are likely to support more medical technology manufacturing in Australia.”

Again, more manufacturing.

Hunt naturally doesn’t make this point but supporting any Australian manufacturing is a prima facie breach of free market doctrine. If you can buy it cheaper overseas, do so, according to market theory. But this theory does not accord with the non-free market world we live in and the threat of massive disruption from pandemics, wars, nuclear proliferation, terrorism and half a dozen other disrupters.

The key to coronavirus patients surviving a stay in intensive care is most often the supply of ventilators. Morrison and Hunt decided right at the start that they were not going to oversee a system in which the oldest and most vulnerable Australians were told they had to die because there were not enough resources to treat them.

So they have moved heaven and earth to flatten the curve, to buy time and to increase the number of ventilators. They will double the normal supply of 2200 to 4400, by using all the anaesthetic machines and ventilator-type equipment normally used in operating theatres and for elective surgery.

Beyond that, ResMed will make 500 ventilators of the type used at home by people suffering, say, motor neurone disease, who can’t breathe on their own. It will also make 5000 of a less invasive ventilator that is a kind of glorified sleep apnoea device. These are not perfect for intensive care but better than nothing.

If the first 500 ResMed invasive ventilators work perfectly well, ResMed will probably be asked to keep making them.

Simultaneously, the commonwealth is sourcing more ventilators overseas. By some time around mid-year, it hopes to have 7500 ventilators available.

These are life-and-death decisions. Establishing a substantial manufacturing capacity in this area, in personal protective equipment for health professionals and in testing kits, must be a sustained priority after the pandemic passes.

Nick Coatsworth, the Deputy Chief Medical Officer, told me: “We are world leaders in research and development in a lot of this stuff. It’s a question of capacity expansion. We can certainly do this stuff. It’s just a question of scale.”

That is true across the economy. We can do what we need if we choose to do it. Doing so will have some cost, though in time it will yield substantial economic benefits, and it can’t happen without government leadership.

This is a challenge for centre-right political parties because a distrust of government as an institution is part of their ideological repertoire. So, rhetorically at least, is blind faith in the blind workings of markets. In reality, of course, centre-right governments frequently intervene in the national interest, as they should.

But they need a new way to talk about it. They could do a lot worse than read American economist Tyler Cowen. He advocates “State Capacity Libertarianism”.

These labels mean much less in Australia than in the US, given our empirical, non-ideological bent, but Cowen’s ideas are immensely rich. He emphasises that only a strong state can maintain markets and capitalism; a strong state need not mean an overweening or tyrannical state.

He also argues that while many modern problems arise from over-regulation, others arise from a lack of state capacity, especially in infrastructure, education, urban design, border control and many other areas. Free market reforms have little to say about the quality of state education or the need to act in the non-market international environment created by China’s size and ruthless, strategic mercantilism.

We have a long way to go in the coronavirus crisis. So far, as a nation, we have responded pretty well. Whether we live or die, and also what comes after the crisis, depends profoundly, not solely but heavily, on the quality of government we produce, not the quality of ideology.