Our States Of (In)competence

15 January 2021
Our States Of (In)competence - Featured image

This article from the Summer 2020 edition of the IPA Review is written by IPA Adjunct Fellow, Matthew Lesh. An edited version also appeared in The Australian on February 13, 2021, see here.

COVID-19 has been a dramatic test of governments across the globe. A once-in-a-century plague descending more or less simultaneously, challenging the ability of states to protect the lives of their citizens. Success has been mixed, to say the least: the United Kingdom has had 24 times more deaths per capita than Australia, the USA has had 79 times more than South Korea. Belgium, the worst performing nation, has had 308 times more than Singapore, one of the best. Even within Australia, Victoria has had 18 times more than New South Wales. There are plenty of popular explanations for why countries did, or did not, succeed. Female leaders such as Jacinta Arden in New Zealand and Angela Merkel in Germany have received glowing reviews. But plenty of male-led countries have low pandemic death counts; just see Shinzō Abe and Yoshihide Suga’s Japan, Moon Jae-in-ed’s South Korea or even Scott Morrison’s Australia.

Then there is the claim that populists—such as Donald Trump in the United States or Jair Bolsonaro in Brazil—have proven incompetent. But even if true this fails to explain why populists like Hungary’s Viktor Orbán in Hungary and Poland’s Andrzej Duda have outperformed centrist darlings like Canada’s Justin Trudeau in Canada and Emmanuel Macron in France. We are then told liberal democracies are incapable of acting swiftly, but tell that to the South Koreans, Japanese, or Taiwanese. None would regard themselves as living in undemocratic countries. Meanwhile, plenty of authoritarian regimes faltered; just see Putin’s Russia or the Ayatollah’s Iran. Plenty of other factors—from healthcare spending to population, urbanisation, and GDP—also fail to persuasively explain pandemic success. Something else is going on.

The prescription for handling infectious diseases is not rocket science. We have seen how countries that moved quickly to introduce border measures, initiate testing and tracing, advising hand washing and social distancing, cancelling large events, stockpiling personal protective equipment, and expanding hospital capacity, have performed the best. Whether countries could take these steps ultimately came down to the underrated question of competence. A University of Munich study concluded that “government effectiveness is significantly associated with decreased death rates”, after controlling for various factors including population age, health system capacity, and government policy response.

Handling infectious diseases is not rocket science.

This is often called ‘state capacity’: the ability to effectively decide and implement good policy. A high level of skills and resources is required to analyse policy options and operationalise policy choices, and for good leadership judgement. This is no easy task, leading to persistent and widespread policy failure. This challenge has only grown as the state has taken on more responsibilities in increasingly complex societies.


Friedrich Hayek’s ‘knowledge problem’ classically explains why markets, not governments, should allocate scarce resources. Hayek writes that central planning fails because:

… knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. [The challenge is the] utilisation of knowledge which is not given to anyone in its totality.

The same principle applies more broadly to policymaking. Even at the best of times, let alone during a fast-moving pandemic, the state lacks knowledge. This leads to inevitable mistakes. As a result, many who advocate for smaller government give up on the technocratic task of improving state capacity. In 1964, Republican presidential candidate Barry Goldwater declared “I have little interest in streamlining government or in making it more efficient, for I mean to reduce its size.” (Goldwater won just six states.)

The fatalistic approach has appeal: countries with smaller governments and greater economic freedom are more prosperous and better protect liberties. Nevertheless, if advocates for smaller government vacate the field entirely, they risk ignoring an extremely important facet of society. Despite allegations of decades of ‘neoliberal’ policies, the state has not shrunk and withered away. It continues to take up almost one-third of the economy and does a multitude of tasks—such as delivering infrastructure, defence, transport, education, and healthcare. This is unlikely to change anytime soon. We, the taxpayers and users of services, therefore have a very strong interest in the best possible bang for our buck.

In a stroke of timing fate, on January 1, 2020, economics professor and libertarian polymath, Tyler Cowen, posted a blog on the growing attachment to ‘State Capacity Libertarianism’. This, Cowen said, means acknowledging the power of markets and capitalism but also the importance of a strong and competent state. Too much government can obviously be a problem when it prevents business creation and undermines freedom. But without the basics of the state—like property rights and the rule of law—private enterprise cannot function. But even more broadly, Cowen argues, many key problems from education to healthcare and traffic congestion, require a better state.

Despite what Cowen suggests at different points in his article, we should see no contradiction between improving the state and shrinking the state. Western governments have too many programs, costing too much and delivering too little, taking up the bandwidth of the state. There are huge opportunities, but if the state is too bogged down in the mundane and useless it cannot succeed. By contrast, Singapore spends among the least on health yet has among the longest life expectancy and lowest infant mortality. It also spends less on education yet comes out at the top of league tables by emphasising excellence and firing incompetent teachers. We can shrink the state and improve the quality of governance.

We can shrink the state AND improve governance.

We must just be on the wrong track. The World Bank’s Governance Effectiveness Index attempts to measure perceptions of public service and civil service quality and the quality of policy formulation. Singapore, Switzerland, and Denmark are the top three. Australia’s position is falling: from 8th in 2004 to 16th last year. We remain ahead of the United States (19) and the United Kingdom (21), but just behind New Zealand (13).


In 2020 questions of effective governance were brought to the forefront, with very meaningful impacts on our prosperity and public health. The initial state failures and cover-up in Wuhan, China, led to an outbreak of a new infectious disease. On the other side of the ledger, we witnessed extraordinary governance success: in Singapore, South Korea, Taiwan, and Japan, and even less expected countries like Vietnam, in preventing substantial outbreaks. They moved quickly in January and February.

Then many Western countries, thought to have high state capacity, failed to heed their warnings. Hundreds of thousands died in some of the apparently wealthiest countries across Europe and America. But even then, we can see differences. The likes of Germany, Austria and Switzerland outperformed France, Spain and the United Kingdom, for example.

In Australia, all state and territory governments appeared to be on a similar successful trajectory, helped along by early border measures introduced by the federal government. There was also an impressive fast-moving design of economic supports for impacted businesses, to help ‘freeze’ them for the duration, as well as an overnight move to the likes of telehealth and virtual justice. Then, a series of cascading governance failures created the exception that shows Australia is not simply the lucky country.

Victoria’s failure to operate infection control in hotel quarantine seeded a new outbreak into the community. Then inept contact tracing failed to catch cases in time. Melbourne experienced one of the most prolonged lockdowns in the world, with an absurd circus of tiny daily case numbers but a lack of willingness to reopen because, apparently, the Victorian Government lacked trust in its outbreak prevention systems.

Contract tracing is a perfect test of state capacity. It is time-sensitive and lives depend on the outcomes. It requires careful sharing of data, coordination across departments, statutory authorities, and local councils, as well as the rapid stand-up and training of teams of tracers and substantial community trust and knowledge. Jurisdictions from South Korea to New South Wales that successfully identified contacts prevented deadly outbreaks without repeated costly lockdowns. Shutting down much of your economy and severely restricting freedom because you cannot prevent a disease outbreak is a tell-tail sign of state failure.

NSW Customer Service Minister Victor Dominello showing the Service NSW QR Check-In app on his phone.

NSW Customer Service Minister Victor Dominello showing the Service NSW QR Check-In app on his phone.
Photo: Victor Dominello MP/Facebook

Victoria’s contact tracing system used pens, paper and fax machines. It was too slow to stop transmission: contacts waited up to nearly two weeks to be notified about a potential exposure. The tracing was operated centrally, compared to NSW or South Korea using decentralised local area health districts embedded in their communities with expansive local knowledge. The result is striking: between June and October, just three per cent of NSW cases had an unknown origin, compared to 22 per cent in Victoria.

Premier Daniel Andrews at first claimed the centralised contact tracing system was not a problem. Victoria’s Chief Health Officer Brett Sutton disagreed in a leaked private video conference with doctors. “It was totally challenged. No question there. Even at lower numbers, there were some intrinsic challenges with contact tracing,” Sutton said. It took until September for the Victorian Government to establish local response teams and procure the world-leading client relationship management software Salesforce (despite being offered it in March along with South Australia and Western Australia, where the offer was taken up).

Victoria being woefully incapable during a crisis was not a surprise.

That the Australian state best known for its woke endeavours and union power turned out woefully incapable during a crisis is no coincidence. Hotel quarantine and contact tracing is just the tip of the iceberg of Victoria’s lacklustre governance. During lockdown, for instance, Victoria required the manual printing and hand signing of forms for the likes of work travel permits. By contrast, in NSW it was possible to use Service NSW, built on Salesforce, to apply for a digital border crossing permit. Officials worked overnight to ensure the system was in place in time for the short notice July border closure with Victoria. This was only possible because of a longer-term investment in state capacity by the NSW Government.


Service NSW was established in 2013 to improve customer service using modern technology It has bought together disperse government service functions, thousands of phone numbers and hundreds of websites, into one a single one-stop-shop system accessible online, by phone or at more than 100 retail shop fronts. It was an entirely new agency whose newly hired leadership and frontline had extensive experience in private sector customer service. It is modelled on former New York Mayor Michael Bloomberg’s NYC311 service.

The Mandarin, the public-sector news website, reported in 2015 how:

Service NSW has completely revolutionised the way citizens interact with government, representing Australia’s first integrated public sector service model.

Service NSW now provides more than 1,200 transactions from a new digital drivers’ licence to public transport card top-up, tools to ease cost of living like energy switching, and check-in for COVID-19 venue contact tracing. They even provide a free, dedicated Business Concierge to guide entrepreneurs through applying for necessary licences and development to start a business. Service NSW sits under the recently established Department of Customer Service that brings together whole-of-government ICT, data, and digital teams.

Under Kennett, Victoria led the way in reforming public service delivery.

The benefits are immense. This project has the potential to save the state billions by digitising transactions previously requiring expensive manual processing. But, most importantly, citizens are saved time and hassles. Calls are picked up within minutes by real humans, not machines like previously. There is heavy use of data to monitor workloads, celebrate success and provide feedback, and the seeking of service-improvement feedback via frontline staff. Service NSW has a satisfaction rating of more than 95 per cent, up from NSW’s 66 per cent customer satisfaction before the project.

The contrast with Victoria could not be starker. In a pathetic imitation, the Victorian Government created ‘Service Victoria’. Although announced in 2015, delays meant it was not actually established until 2018. There is no single call centre or shop fronts, and the website often just links to other government pages to complete transactions. Already it has had failures: last year a solar rebate application ‘public beta’ had a 40 per cent failure rate for facial identification—embarrassing, considering identity verification is meant to be one of the main features of Service Victoria.

Under the Kennett Government in the 1990s, Victoria led the way in reforming public service delivery by decentralising and empowering local control. It has now fallen dramatically behind. In 2020 the Victorian Government is making a new effort to rectify these issues with the establishment of a new ‘Digital Victoria’ to spearhead digital transformation with a dedicated minister. But the funding, at $196 million over four years, pales in comparison to NSW’s investment over the last decade. The proposed approach to deal with Victoria’s siloed public service is “dialogue and respectful engagement”, per the responsible minister, Danny Pearson. This could prove too feeble to bring about the necessary change at the scale Victoria now needs.

There are also important efforts at the national level. The Digital Transformation Agency (DTA), established in 2016, is responsible for improving service delivery using technology. This includes building a new MyGov integrated with Services Australia (formally the Department of Human Services and Centrelink, which is responsible for delivering welfare, health, and child support payments). The DTA is modelled on the United Kingdom’s Government Digital Service.

“What if everyone could have simple, smart, and personalised interactions with government?” a DTA advertorial asks. The video shows a one-stop portal website that lists a citizen’s services, task and date reminders, past and upcoming payments, application progress, and allows secure communication. (The test version of this system can be accessed at beta.my.gov.au)

The legitimacy of liberal democracy may be on the line.

These efforts are designed to make interacting with government a bit more like dealing with your bank. While not perfect by any stretch of the imagination, there would be every effort to provide a better service. This means no longer treating you like a tax file number, but rather as a customer-citizen.

There are numerous concerns, beginning with privacy. People must be able to choose whether they partake in the systems—the opt-out approach taken for My Health Record undermines trust. There are also cybersecurity risks. In April, Service NSW experienced a major data breach that exposed 3.8 million documents containing the personal information of 180,000 residents after a preventable phishing attack accessed the email accounts of 47 staff members. The NSW Government has since announced $240 million over three years for cybersecurity.


Good governance coupled with useful technologies does not just make lives easier, save taxpayer money, and help business creation; it has much bigger implications for the future of our institutions. The stakes could not be higher. The COVID-19 pandemic has taken a battering ram to the legitimacy of many Western governments, falling behind much more competent states in Asia. Bloomberg’s John Micklethwait and The Economist’s Adrian Wooldridge describe the pandemic as a wake-up call for the West:

If we respond to the COVID crisis intelligently, treating it not just as a public-health disaster but a stress test of Western government, if we take government seriously as Asia does, we can preserve the Western advantage.

Taiwan President Tsai Ing-wen inspects the Central Epidemic Command Center on April 2, 2020. Photo: Taiwan

Taiwan President Tsai Ing-wen inspects the Central Epidemic Command Center on April 2, 2020.
Photo: Taiwan

If we ignore the crisis, a China-dominated world beckons, they claim. The few hundred years’ experiment in government by the people, for the people, is little more than a tiny speck in history. If it is to endure, it must effectively serve the people. There is much work to be done. The state has fallen behind the private sector—governments struggle to mimic business’ capacity to deliver services at people’s fingertips in a constantly evolving manner. Service Victoria is a joke, Services Australia is still in development and even the most successful, Services NSW, is just a beginning. We have come to expect mediocre customer service from the state. This needs to change.

You should be able to communicate with the state—be it to start a business or a family—in a simplified, integrated and streamlined manner. Journalist Tom Burton, advisor Martin Stewart-Weeks, and consultant Simon Cooper called this “government without portfolio”. It requires integrating divergent systems across departments, state and federal lines and public and private sectors:

This will inevitably see the end of public brands like Centrelink, as well as department names, as services are increasingly joined up designed to meet customer needs, rather than government organisation charts.

These systems can then be combined with personalised services that offer timely and relevant support using data and advanced analytics. Altogether, the changes could provide efficiencies worth billions to the Australian economy. Fixing governance will take big investments in talent and technology, as well as new ways of thinking about how the state operates. It does not just mean grabbing for the latest whizzbang technology.

The late and sorely-missed Paul Shetler, the founding head of the DTA, was scathing about government agencies who cannot even “answer the friggin’ phones” spending big on fandangles like big data, artificial intelligence and holographic interfaces. The focus, first and foremost, must be on service delivery. “Nobody wants to engage with government,” Shetler warned. “Nobody cares about the DTO, ATO, DHS, DSS—the whole alphabet soup—nobody cares about any of that. Nobody really wants to engage with it, because people just want to get stuff done.”

Shetler was a controversial figure. He pushed back against opposition from bureaucrats and ministers in silos protecting their turf. “Ministers tend to be captured by the departments they are the minister for, and sometimes that causes problems,” Shetler warned. The approach need not be Silicon Valley-style ‘move fast and break things’—this could doom reform efforts. But there is a need to acknowledge that cautious public sector tendencies are inadequate in our increasingly complex world. The hierarchal public service model captured by Max Weber, designed for 19th century challenges when the state was substantially smaller and the technology we have today unimaginable, is not suited for 2020. There is a need for an agile, iterative and experimental approach—along with some acceptance of failure.

State capacity really does matter.

People will be key to the change. There must even be a willingness to pay good money to hire capable people with a wide array of skills beyond the humanities. Government should be full of people with backgrounds in hard science, data analytics, and software engineering. Governing is a challenging task: the scale is massive, antiquated systems are hardwired and politics is constantly changing. Improving and simplifying government is fiendishly difficult. There have been many false starts and embarrassing failures. It is a radical exercise that takes a lot of political will and pushing back against bureaucratic inertia and entrenched interests.

We have learnt the hard way this year that state capacity really does matter. Good governance is the difference between life and death, freedom and tyranny. It is simply too important to ignore.

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