Comment

John Hewson
Mathias Cormann’s failures at the OECD

As the nation battled the pandemic, one of the most conscientious commitments of the Morrison government was its extensive support, including provision of a RAAF plane, for Mathias Cormann’s campaign to become secretary-general of the Organisation for Economic Co-operation and Development. 

Morrison initially proposed the job to Cormann. A team was set up for his campaign and more than eight people were appointed to it, at taxpayers’ expense. Morrison made 55 phone calls to world leaders pushing Cormann for the role. He brought it up at virtual meetings intended to be focused on fighting the coronavirus. 

This backing for Cormann’s OECD bid – which included travel funding and support from the departments of Treasury, Finance, Foreign Affairs and Trade – was one of the most significant breaches of integrity and received only limited scrutiny at the time. Cormann won the position in March last year, despite not being a strong candidate. Indeed, he was a very controversial candidate. He is a lawyer rather than an economist, although he held strong personal conservative views in favour of lower taxes, smaller government, open markets and free trade. Such views were essentially ideological, based more on prejudice associated with the Coalition myth of being “better economic managers” rather than any hard research, evidence or personal experience. 

Moreover, Cormann had been a fairly pedestrian Finance minister through very fiscally challenging times, given the state of our budget and the financial challenges of the pandemic. It is noteworthy that he never seemed to have an economic recovery strategy from the pandemic, and certainly not a transition plan to a low-carbon economy. In terms of fiscal policy, Cormann was perhaps best known for co-authoring the draconian 2014 budget with then treasurer Joe Hockey, and for their “celebration”– they were filmed smoking cigars together. 

Draconian restraint on expenditure raised memories of Cormann’s personal largesse and his initial failure to pay travel group Helloworld for several family flights to Singapore, which he “explained” by saying he had no idea that his credit card had not been charged. Helloworld had close ties with the Liberal Party: Hockey was a significant shareholder and his wife had been on the board of an associated company.  

Cormann had also been an active obstructionist on climate, most notably by trying to abolish the Clean Energy Finance Corporation and the Australian Renewable Energy Agency. His climate record resulted in a group of Australian and global humanitarian and environmental organisations writing to the OECD in an effort to have him disqualified as a candidate, citing “grave concerns”, due to his record of “thwarting effective climate action”. Cormann had also displayed disloyalty in Liberal Party leadership contests. 

It is most important to consider the consequences of Cormann’s candidacy. It raises the question: How distracting was this campaign for Scott Morrison and the government? Did it help explain why the then prime minister didn’t negotiate an adequate vaccine supply? Was it a factor in his decision to secretly appoint himself to all those ministerial portfolios? 

Among the global consequences, the impact on our credibility and standing in public policy has become significant, as it has become apparent that, as many had feared, Cormann simply wasn’t up to the job. Indeed, he has been at odds with top global economists as he has attempted to push the OECD in the wrong direction. 

Specifically, Cormann has moved to effectively shut down one of the OECD’s most innovative programs, the New Approaches to Economic Challenges (NAEC), a program established in 2012 by his predecessor as a means to introduce new thinking into the institution following the global financial crisis. 

This was a very important and timely initiative embraced by many of the world’s leading economists, who recognised that orthodox economic thinking had helped precipitate the 2008 crisis, and that new ideas may be needed to recover from the crash. NAEC was to be the mechanism by which the OECD led that process. 

While this program may not ultimately change much of the thinking of the OECD, and beyond that the thinking of key governments and the wider international economic policy community, it provided the space for new theories, new research evidence, and the contest of economic ideas. That’s a process in which Cormann would have seemed a duck out of water, given the ignorance displayed in his Australian government experience where the “policy debate” was little more than a competition of meaningless three-word slogans backed by unsubstantiated assertions and attempted scare campaigns. 

Cormann’s mismanagement has resulted in an international group of 26 economists and academics, including a Nobel laureate, who had worked with NAEC, writing an open letter to the OECD to express their alarm at its demise. Some had written privately to Cormann in January, praising the work of the NAEC, and asking him to maintain it, but had not received a response. So they went public with their concerns. 

Cormann could not have found a better way or a better time to reveal his irrelevance, given the multiple threats facing countries, many of which are OECD members, including “stagflation” – that is, simultaneously accelerating inflation and a drift into recession – and potential debt crises among some of the lower-income countries. These challenges are compounded for all by the overarching existential risk of climate change and the need for decisive and urgent action. 

There has been mounting and widespread concern about the persistence of traditional neoliberal policy prescriptions. The final paragraph of the open letter emphasised that in these circumstances globally significant organisations such as the OECD and the IMF – which provide commentary and advice to governments – need to be at the forefront of economic knowledge and policy analysis.  

“This to and fro between received economic ideas and new ones is an important part of how intellectual and practical progress is made, both in economic analysis and in policy,” the letter said. “We remain of the view that not just the OECD, but the wider international economic policy community, would hugely benefit from NAEC continuing in this role. It needs the remit and freedom to challenge conventional thinking and explore new approaches to the deep and urgent economic problems the world faces. We very much hope we are wrong to believe that NAEC has been reduced to an entirely internal focus. Indeed, we would be pleased to support you and your staff in developing a new work programme for NAEC, and would be glad to contribute to such a programme in these most difficult times.” 

Cormann couldn’t hope to get away with his slogans and backgrounding that worked in Australia with a sycophantic and compliant media. 

The most galling aspect of this saga is that the delusional Morrison government, having hoped to game our democracy by using public funding in its attempt to save and win key seats at the election, thought that they could similarly game a significant global recruitment process by backing Cormann for the OECD position. This has cost us dearly in terms of our standing and credibility in the global economic and public policy debate and processes. What an appalling, self-indulgent lack of integrity. 

Ironically, Morrison was unfortunately right – after all, he should know – in his post-election sermon from the mount when he claimed, “you can’t trust government”. Not his government, at least.

This article was first published in the print edition of The Saturday Paper on October 8, 2022 as "Mathias in knots".

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