Michael Easson

AM FRICS FAICD MSc Phd

How the machine ate the Labor Party

Australian Financial Review, June 11, 2010
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The two unlikely heroes in Simon Benson’s Betrayal are former NSW premier Morris Iemma and former NSW treasurer Michael Costa.

Benson has written a readable, coherent perspective on the battles in the NSW Labor party in 2007-8 over electricity privatisation. A sense of outrage creeps into the telling, which gives edge and fervour to the narrative.

At stake was whether government should own generators and retail businesses (in risky markets), whether energy distribution should also be privatised (that was off the table early) and the careers of men (and some women) who had grown up with each other over decades of political interaction. Friendships were destroyed; malice and vindictiveness clouded the arguments.

Also at stake was what should any proceeds be spent on.

On the sidelines, with various attempts to drag them onto the field, were the federal government, Prime Minister Kevin Rudd, key ministers and the ALP national executive.

Iemma and Costa pressed reform with imagination, perseverance and courage but were politically outclassed and made many woeful tactical mistakes. Their cause essentially amounted to wanting to cash out certain public assets in NSW energy infrastructure to invest in new public infrastructure. The government’s case was that investing in new demand and in upgrading tired infrastructure in a contestable energy market – especially with competing demands for new infrastructure – would misallocate scarce resources.

In 1997 Premier Bob Carr almost resigned when he was blocked on electricity privatisation. The assets were then estimated to be worth $30 billion. In 2007, the value was about $15 billion. Post the global financial crisis, the price has whittled away further and the sale process has descended into confusion.

Iemma and Costa were opposed by the unions and the party machine.

The unions were led by John Robertson, then head of Unions NSW, now a NSW minister, and Bernie Riordan, head of the Electrical Trades Union and NSW ALP president.

The party machine was steered by Mark Arbib, a former NSW secretary, a senator and minister in the Rudd government and his acolyte, Karl Bitar, then NSW ALP secretary – now national secretary – for most of the period covered by the book; and Luke Foley, the wily left-wing NSW assistant secretary.

Each of the opponents were motivated by different reasons; ideology mattered to the unions and not much to the right-wing ALP apparatchiks.

Benson states that Rudd welshed on a deal with Iemma. That deal was allegedly put during the time of the September 2007 Asia-Pacific Economic Co-operation forum in Sydney. Rudd, who was then federal opposition leader, is supposed to have told Iemma that if he delayed proposals to move ahead with electricity privatisation, then Rudd would strongly back him after the federal election. Iemma says they shook hands on a clear path forward. The future PM didn’t want the unions going “bolshie” before the federal elections, due in a few months. Iemma and Costa say that Rudd betrayed them by not honouring the agreement.

In testing this and other propositions, it’s a pity many of the key protagonists, including Rudd, declined to be interviewed.

Benson’s book describes the machinations and issues leading to the premier’s efforts to find an agreement in NSW that enabled “reform the Labor way”. In the end, all was lost. Iemma resigned in September 2008. Costa was sacked in one of Iemma’s last acts. Two left wingers, Nathan Rees as premier and Carmel Tebbutt as deputy, were elected to the leadership. This was unprecedented. Rees relinquished his Left faction membership, lasted a year before being replaced by Kristina Keneally. The Right ALP MPs wanted their party back again. But all the king’s horses and all the king’s men.

The clear winners were the machine men. The losers, the ALP more generally, including loss of respect for the party in NSW.

The issues covered in the book include the party machine and the purpose of politics, whether bad policy is bad politics, poll-driven focus groups and policy formulation, the influence of unions in the modern Labor Party and the contemporary evolution of the NSW Right. Most of all, the book is a critique of the sad decline of what was once a powerful political machine.

Centre Unity, as Paul Keating renamed the dominant faction in NSW in 1978, sprang to life in the period 1939 to 1941 with the deposing of Jack Lang and the election of Bill McKell (premier 1941 to 1947) as NSW Labor leader. Keating comments in the book that the party nationally has long depended on the processes and real-world touch of the dominant grouping within the NSW party. There was a model of governance that went with a style and perspective of how Labor should govern. “Labor has had control of NSW for the great part of the 20th century on the basis of the government in Macquarie Street having a sovereignty of its own relative to the party. There was of course a union base, and party membership and co-operation, but nonetheless in term of the calibration of power, the premier and the cabinet had the call. That is what has changed”, Keating says.

Yet with the electricity privatisation in 2007-08, there was a return to the Lang era governance of party machine and state conference directing the government.

Iemma wrongly believed in the rationalist fallacy – that if others could accept the same premises then he could win the argument. In politics, some are impervious to persuasion.

Several myths deserve thrashing – including a few promulgated in the book.

First, I don’t find the claim about the Rudd betrayal compelling. Iemma never acted like there was a promise by the PM. Not before the May 2008 NSW ALP conference, not immediately afterwards. Iemma waited to August 2008 to ask to be saved. I find “betrayal” an extreme description.

I know that many pleaded with the premier to raise the issue early in 2008 with the federal executive. A QC’s opinion was prepared in February 2008 showing the proposed policy was compatible with and supported by the federal platform. Martin Ferguson, the federal resources minister, said as much. The Unsworth report commissioned in 2007 by Iemma and the party officers stated that the proposals were consistent with the NSW party platform – which had not validly been changed at the May 2008 conference (where insufficient notice had been given). Rudd made various supportive statements of Iemma. Treasurer Wayne Swan was more publicly supportive. It’s not like the NSW government was entirely discarded.

Second, Iemma, in particular, was a hopeless ditherer. Both he and Costa, in different ways, were their own worst enemies. Costa heckling Rudd at COAG meetings and impersonating Malcolm Tucker (the foul-mouthed character from In the Loop and The Thick of It) by telling the PM on various occasions to f**k off was not smart. Costa was a provocative, clever, driven politician whose energy needed harnessing and guidance from a stronger premier. As Benson says in the book, “. . . Iemma was starting to pay a high price for Costa’s strident negotiating style. He knew he needed Costa if he was going to succeed with his plans. He needed a vanguard to push the debate hard, yet he also had to show he was prepared to box Costa’s ears if he went too far.”

Third, at most, the NSW government was delayed a few months by Rudd’s plea that NSW hold off on electricity privatisation for the federal election, held on November 24, 2007. Iemma and Costa should have gone hard right after, in December or early in the New Year. The premier prevaricated.

Fourth, I think it is a stretch to say that Rudd dishonoured promises to NSW on federal infrastructure funding. Everyone knew that the quality of the NSW government submissions were woeful. Knockbacks from the feds for poorly proposed schemes were deserved. Benson, however, suggests that the proposals put to Canberra were intelligent, well researched and capably argued. As these documents are secret, the reader is unable to tell.

Fifth, even if they were wrong on privatisation, Robbo and the unions in Unions NSW weren’t hopeless Troglodytes, smitten by left causes. Refugees is mentioned as an issue. Is humanitarian support for refugees really just a left-wing cause? Robbo’s role in getting WorkChoices on the agenda and pushing the message to the wider community, with several years of caravan campaigning tours throughout NSW, helped win the 2007 federal election.

Sixth, it doesn’t ring true, despite assertions that Eddie Obeid and Joe Tripodi, NSW MPs and power brokers, ratted on the premier and, at the end, schemed his destruction. There’s plenty of suspicion voiced in the book by Iemma and Costa. But the evidence points to Obeid’s unstinting loyalty until it was impossible to go on. Their actions were pragmatic and not driven by disloyalty.

Yet, despite these difficulties in the analysis, the book compellingly indicts the opponents of privatisation for wrecking a Labor government and, in the case of the machine men, acting without a skerrick of shame or principle. In 2008, it was Darkness at Noon for NSW Labor. Arthur Koestler’s Gletkins had taken over.

There is another myth worth rebutting, not really canvassed in the book. It is the alternative story of what happened and why. There is the left version of how the Labor Party works such that conference is supreme and, through some mystical process, policy is divined, sanctified and catechised at state conference. The party instructs the premier and cabinet on key policy. Thus there is the famous victory of 2008, according to this myth. Premier and heretics were burnt to oblivion.

This is far from the McKell model, described in the Keating quote above. The last time crude direction was given occurred in the early 1960s when the federal machine instructed the NSW branch of the party and the NSW government to cease funding private schools. In the ensuing political melee, Robin Askin narrowly won the 1965 state election.

Before Iemma resigned, throughout 2008 he won three decisive wins at caucus meetings. This was an impressive scorecard. Many MPs, including Costa – as revealed in the book, didn’t like how the money would be spent on an $18 billion north west metro, championed by Iemma. Yet most MPs were defiant against the machine and its threats to their preselections. MPs in the upper house, then the lower house, however, were promised “protection” by the party officers should they cross the floor to vote against privatisation. This became debilitating. But it was still stalemate. Morris believed the federal executive cavalry would come riding over the hill with their flags held high. But his inaction is as much to blame as any promise Rudd may have made to him. In reality, Iemma probably made it impossible for Rudd to honour it.

Iemma sought a breakthrough and counsel. One commanding, nagging voice urged a big shake-out of the entire ministry. It was Keating. But it was a bit like the film Play It Again Samwhere the nerdy Woody Allen character seeks guidance from the tough Humphrey Bogart/Rick Blaine character from Casablanca. Absurd tough-guy recommendations were pressed. Iemma translated the advice into mass sackings from the ministry, including loyal friends. Wiser heads pleaded with him to limit the carnage. The bigger the bloodbath, the narrower the premier’s support base. He lost it.

Yet another kind of boldness may have got him over the line. Seeking federal ALP intervention would be like a burning man running ahead, grasping someone, screaming that the fire be put out. You might get scalded, resenting the burns, but what choice do you have? On this analogy, Rudd had to put out the fire.

Although the machine men promised each other to block any move to consider NSW privatisation at the national executive, that wasn’t the end of the matter. The issue could still be raised. The truth is that key federal executive members weren’t even canvassed, not even Joe de Bruyn from the Shop, Distributive and Allied Employees Association, Australia’s largest union with an immense power base. Morris Iemma was too shy, too timid.

After it was all over and Iemma resigned in September 2008, Neville Wran wrote a short, moving tribute, revealed in the book for the first time, stating to Iemma that: “The circumstances of your departure and your conduct throughout the whole distasteful affair reflect great credit upon you which, of course, could not be said of those who orchestrated the debacle. You will be remembered for your positive contribution to the party and the community long after the Lilliputians, who created the impossible situation that confronted you, have been forgotten”. Iemma’s execution rested on a cynical basis and with zero respect to the traditions and ethos of the party and that of the NSW Right.

In the book, the characters press and defend their claims. The interweaving of explanation, narrative and quotes works well. Keating’s and (former NSW premier) Barrie Unsworth’s voices are threaded through the narrative like Greek choruses interpreting the power play. In the telling of the tale, scores are settled, angles favourable to the interviewed are presented as truth.

The last word belongs to Costa: “You would now have had a state government cashed up and shovel-ready on infrastructure projects.

“Rudd himself became a victim in all of this because of he took bad advice. He will go into an election with a NSW branch, a party, in more disarray than when he had come to power. And he has no strategy to fix the problem.”

And this is why the PM should have volunteered to help, promise or no promise. His only real defence is the “Christine Nixon defence”. As disaster unfolded, as the gales of destruction blew and the ashes fell, the situation was being actively monitored.

Who would have thought that the guile, acumen and skill of the NSW Right, built over 70 years, would in 2008 prove so destructive of brand Labor. The same crew who destroyed premier Iemma and energy reform have more recently provoked Rudd’s spiralling downwards trajectory in the opinion polls when, in early 2010, they told him to coldly drop the Emissions Trading Scheme. That’s not how you change policy. Only if you have no interest in good policy would decisions be made like that. The electorate is now uneasy about how much government cares about anything. Surely NSW Labor has never slouched so low.

If Labor loses federally in 2010, one of the reasons might be the weaknesses of the party in NSW. Rudd faces an election before the next NSW poll due in March 2011.

As a snapshot of what happened, the book deserves comparison with Alan Reid’s The Gorton Experiment (1971). The events, scheming, the atmosphere and personalities, drama and ultimate tragedy are deftly sketched. Benson’s book illuminates how the NSW machine betrayed its own traditions. That’s the real betrayal in the events described.