John Menadue. What has the government done for us?

Jan 1, 2016

Repost from 25/02/2015

Many will recall in the Monty Python film, the Life of Brian, an anti-Roman revolutionary played by John Cleese, but who reminds me of Joe Hockey, asks rhetorically about the Romans, ‘What have they ever given us?’  Expecting the answer ‘Nothing’, he is irritated when he is told that they provided aqueducts. Cleese’s character slowly concedes further points, until he asks ‘Apart from the sanitation, medicine, education, wine, public order, irrigation, roads, fresh water system and public health – what have the Romans ever done for us?’  And still someone chips in with another suggestion of what the Romans have done.

Clearly the Liberal Party holds a similar view to the anti-Roman revolutionary. Its platform says ‘That only businesses and individuals are the creators of wealth and employment’.

The Commission of Audit in its highly ideological report assumes also that government and ‘red tape’ must be cut back.

Like the John Cleese character, conservatives choose to ignore the great pioneering and continuing role of governments in our community and mixed economy – roads and railways, power, water and sewerage, law and public order, security, education, hospitals, galleries, museums and national parks.  I could go on!

In world terms, we have a small public sector in Australia. Including all levels of government, our public sector is less than 35% of GDP. The OECD average size of government is over 40% of GDP. In the successful northern Europeans countries such as Germany, the Netherlands and the Nordics, the public sector exceeds 43% of GDP. And they have taxes to pay for their successful public sectors.

Just think of what Norway has done in establishing its public Pension Fund. This fund now has $1 trillion in investment. The fund was established by the Norwegian government in the 1970s when Norway began to develop its oil and gas resources. If only we had done something similar to tax the super profits of mining companies in the recent mining boom. We would now have a stronger and more diversified economy. Instead we have companies like Rio Tinto returning $7.8 b to shareholders in a share buyback.

The successful economies of the world have all invested heavily in the public sector to enhance human capital in areas such as education, science, research and development, and innovation. But in the name of economy and reducing waste, we are reducing government funding in these areas. We don’t even have a Minister for Science.

No country has ever achieved greatness by cutting back on key government activities. This is not to say that the government sector should be large. But it should be effective and efficient.

Just look at some of the false economies that are part of the current political environment in Australia that would damage the public sector and the public interest.

  • The government is considering cutting back the Australian Bureau of Statistics and possibly the five year census. But so much of ABS data is essential for good decision-making in both the public and private sectors.
  • We have cut back on policy and administrative skills in commonwealth departments and more and more we contract it out to so-called independent and professional management companies that have little or no corporate memory. One consequence of the scaling back of government expertise was the pink-batts mess.
  • The economists we see and hear so much of on TV are usually in the pay of big corporations and the banks. They are unlikely to give us an independent assessment in such areas as privatisation and superannuation. Cut backs in university funds have resulted in fewer intellectuals working in the public square.
  • Late last year the former Assistant Commissioner of the Australian Tax Office warned in a letter to the Australian Financial Review that repeated efficiency dividends had seriously hurt the ATO’s ability to collect tax. In the recent budget, the ATO had its funding slashed by $189 million with more than 3,000 jobs to go. With corporate tax avoidance almost endemic what a strange time to be cutting back ATO staff.  My mother would have said it was ‘penny wise and pound foolish’. Economists would call it a false economy.
  • The public sector is often more efficient than its private counterparts. For example, private health insurance firms have operating costs, including profit that are three times higher than Medicare.
  • Comparing ‘apples with apples’ public hospitals are as efficient as private hospitals. Schools in the public and private sectors that enrol similar students turn out much the same results
  • The derided ‘red tape’ is often the means to protect the public interest. No wonder private ideologues don’t like it.
  • Governments can borrow much more cheaply than private corporations, but it is seldom mentioned.

We have been encouraged to forget that our prosperity is based on both public and private goods. To many people government has become ‘invisible’, except as a vehicle for welfare. Australians have lost sight of the contribution of the mixed economy, not only providing public goods, but also in ensuring that the forces of greed and short-sightedness don’t lead to economic collapse.

It is noteworthy that despite the continued denigration of government and the public sector, the three most trusted institutions in Australia are public institutions – the High Court, the ABC and the Reserve Bank. In the survey by Essential Research, there was not a private group in the top eight most-trusted groups and institutions in Australia. The three least trusted groups were business, trade unions and political parties.

There is a major and important role for governments to play. We need to assert the importance of the economic role of government in our mixed economy. We should stop apologising for government.

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