Neo-Liberal Governance

Since the 1980s, governments have been shifting progressively away from the post-war ‘Welfare State’ model towards a neo-liberal paradigm.  The distinctive difference between these two diametrically opposed styles of governance is that today, governments no longer directly provide public goods so much as facilitate their delivery through private entities such as corporations.  As a result, they have over time become increasingly dependent upon private enterprise for the delivery of infrastructure and public goods such as schools, hospitals, transport and heritage. 

Concomitantly, in most developed countries, we have witnessed a steady rise in the corporatisation of national and state economies in the last four decades to the point now that many economies are dominated by corporations and governments are relegated to subservient roles.

Insofar as CBH is characterised as a public good, a reverse trend arises. Traditionally, citizens expect that governments to not only regulate but also fund and maintain cultural, natural and indigenous heritage.  Yet, this is not the case as demonstrated in the Productivity Commission’s Report on Conservation of Australia's Historic Heritage Places (hereafter PCR 2006). 

The PCR 2006 states that a centrally contentious issue is the extent to which governments should participate in the conservation of historic heritage places and the principles which might guide that intervention. Government intervention can be warranted in the presence of market failure.  That is where the private benefits or costs of an activity do not fully reflect the social benefits or costs (115).

In its submission, Australia ICOMOS argued that there has been clear evidence of market failure in historic heritage conservation.  It stated that it is abundantly evident in Australia’s capital cities that the absence of effective historic heritage regulation in the mid-twentieth century accounted for vast swathes of inner-city areas in Sydney being deprived of a rich stock of historic buildings to make way for large-scale commercial developments. Underlying land values, reflected in the ‘developable potential’ soared because the market did not value the existing historic building stock for its role as a ‘public good’ (PCR 2006, Submission 112, 9).

While acknowledging the crucial role of the private sector in historic heritage conservation, the Chairs of the Heritage Councils of Australia and New Zealand in their submission, identified circumstances under which government intervention could be justified.  Generally, communities voluntarily support the conservation and maintenance of heritage places because they receive a range of benefits and values from doing so. However, the nature of some of these benefits mean that sometimes the market will not provide a socially optimal level of protection for historic heritage places.  In such cases, ‘market failure’ exists when there is a divergence between the marginal social costs and benefits and the private costs and benefits of investing in conservation. In the presence of this divergence, there is a prima facie case for government intervention to correct the market failure (PCR 2006, Submission 187, 4).

However, adopting a classic rationalist economic approach, the Commission argued that without government’s ability to enter into a bargain or trade over the positive externality which may result from an inability to enforce private property rights over the externality, there will be no mechanism to ensure that those benefiting from the externality are able to encourage a socially-optimal level of external benefit.  Noting that the existence of community-based benefits may provide a rationale for government involvement, this does not necessarily justify such involvement.

That is, the presence of market failure as a result of community based benefits is a necessary, but not a sufficient condition for government intervention. To establish whether intervention is warranted, it is necessary to consider the costs and effectiveness of such intervention (PCR, 2006, 117).

Essentially, this line of argument signifies the government’s position in respect of CBH in Australia today.  It argues that despite CBH being able to generate positive externalities for communities, there is no role for government to play in respect of privately owned CBH which constitutes the overwhelming majority of national heritage resources – 90% (PCR 2006, 38).  The reasoning extends to a prohibition in which not even the occurrence of market failure in the sector would justify a need for government to intervene.

Daniels and Trebilcock (1996) argue that policy-makers, constrained by severe, ongoing fiscal pressures and being sensitive to concerns over bureaucratic inefficiency, have endorsed a shift away from reliance on governmental provision of goods and services in favour of provision by other actors. The claim is that in comparison with governmental delivery systems, private sector modes of delivery offer a superior means for organizing productive activity because greater incentives exist within such arrangements, especially in respect of lower-cost, innovation and efficiencies.  Neoliberalism promotes a laissez faire approach to the economy in the belief that market forces alone establish relative values in society.  In this sense, governments need not regulate where markets are seen as capable of self-regulation.  Notwithstanding, public goods such as CBH suffer in a number of ways.

In her 2007 review of submissions made to the Productivity Commission Inquiry (PCR 2006) on behalf of the Heritage Chairs and Officials of the States and Territories of Australia, Wood maintains that the overarching message is that government – specifically, local government - although committed to heritage conservation and appreciative of its value to local communities, is unable to manage its responsibilities in respect of conflicting community expectations because of inadequate resourcing, cost shifting, and failure of federal and State/Territory governments to provide the kinds of support and incentives required.

The local government submissions indicate that there is lack of capacity to research or access research, to train or access training and to inform and engage and support the community’s heritage interests.  This places limits on the quality of conservation at local level which results in a denuding of community support for heritage systems nationwide.  The Wood review exposes an incapacity of current heritage management systems in Australia by identifying a lack of political commitment to funding the sector.

Paul Rappoport - Heritage 21 - 12 October 2013

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