JIM COOMBS. What Economic Policy should be about

Aug 4, 2017

The idea that government economic policy should only be about making capitalist enterprise easier is just plain wrong. It should be trying to make it better for the nation.

The “economic question”, so we were taught, is how to find the optimum allocation of finite resources amongst competing ends.  So the idea that any proposal which makes money, especially in the short term, which seems to be the current orthodoxy, could not be even wildly considered optimum.  We have to make our choice on the basis of what is best for the individual, the business, the country, the world. “Best ?”, I hear the neo-libs shriek, “are you importing value judgements?”  Well, yes.  How else to determine what is optimum?  So, question one must be, “Is this the best use of the resources at hand to serve our purposes?”  We have to decide what is best for us, our business, our community and so on.  And not just for now, but into the future.

For government what is seen to be optimum will, inevitably, differ from the perspective of a business and its market.  In a sane, well-ordered society, government has the task of ensuring that the basic elements of civilization are ensured: we have to have universal water reticulation and sewerage (not a market solution), universal access to power (electricity, gas, etc)(ditto), telecommunications, let alone adequate food supplies (think “Venezuela”).  These are the “public goods” which I have previously written about.  It is non-productive to let “the market” into these things, as the profit motive is the least consideration, and equity the principal one.  Then, sadly, we have the need for defence, and the management of our relations with the rest of the world.  And, even more, the environment, our natural resource, which must be protected to sustain everything else. For equity’s sake we should include public education and reliable , accessible transport.

As Keynes rightly observed, the role of government in the economy is vital to keep the balance that allows for the capitalist system to operate, both fairly and successfully.

I used to think that these things hardly need saying, but the neo-liberal (whatever that means) economics appears to ignore it all completely, making Says Law (a trivial truth) into a near religious mantra: “the market” can solve everything ! Well, it can’t. At least not in a civilized society.

So how should government proceed ? Firstly it should ensure that it has the revenue to achieve equitable distribution of public goods. Yes, the citizens must expect that they will pay. Using tax as a “boo word”, appeals to the mean spirited, but survey after survey shows that the clear majority are content to pay a bit more to ensure that fair and adequate services are provided, reasonable pensions, unemployment relief and so on. But there is more to tax than that. Tax has been used  (and still is) as an instrument of government policy. It is used to discourage the consumption of unhealthy or antisocial products like tobacco and alcohol (and incidentally reap lots of revenue for the government). Tax should discourage the bad and encourage the good (thank the Lord for good old fashioned value judgements). On-line gambling, which is unproductive and socially destructive, should be high on the list of candidates, ditto poker machines. Foreign investors in property who do not provide affordable housing should not escape the tax axe. Supporting dubious operators in the education and employment sectors should be reversed, so as to fund proper education for our children, preferably in the not for profit government sector, and employment schemes which are not designed to fleece the workers so employed restored.

The notion that anything which turns a short term profit is “business” and bears no further examination, is, by definition, short sighted, and socially deleterious. Somehow stock exchanges have to be reeled back to what investment really is, putting resources to worthwhile uses, instead of the moment by moment casino operation manned by computer algorithms which is what we have got. These “investors” (read “speculators”) reward companies who sack workers, off-shore production to exploit unregulated foreign labour, and produce unhealthy and antisocial products. Surely the tax weapon can be used to restore sanity, and direct resources to ends which benefit the people as opposed to corporations, many off-shore.

No doubt this will attract accusations of “socialism”, yet it is what we used to do when government was for the people.

I have not mentioned nationalisation as opposed to privatisation. But the idiocy of privatising the NSW Land Titles Office is an example of government deserting its post. British privatisation and multifranchising of the railways is a widely acknowledged disaster, as is water supply privatisation.  And privatised telecommunications, with multiple providers, has become an impenetrable maze, and an almost certain rip-off (but that is “commercial-in-confidence”).

So why can’t we have a Government with a sense of Right and Wrong that acts upon it?

Jim Coombs is a retired magistrate and sometime economist.

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