The Problem With Governments (Contd)
Why the Taxpayer Gets Poor Value For Money
I've commented before on the problems with various public services, particularly in NSW (don't mention the trains!). From today's editorial pages of "The Australian":
"It is true that everywhere we look in Australia we see a crisis in the delivery of services. Commuters on Sydney railway platforms gaze forlornly up the tracks for trains that do not arrive. Public patients languish on year-long elective surgery waiting lists. Power outages have hit every state except NSW and Tasmania and most of the states are in the grip of water restrictions. Perhaps most tellingly, parents are fleeing the public education system, no longer confident it can give their children the skills – and values – they deserve. Meanwhile, infrastructure lobby groups point to a long-term reduction in capital spending by governments and argue this is dampening growth by as much as 1 per cent of GDP per year. But alarmist projections by groups that stand to gain directly from a taxpayer-financed infrastructure boom should be treated cautiously. Part of the overall reduction in public infrastructure spending is the result of the privatisation programs of the 1980s and 1990s. And just as those programs have led to more efficient delivery of services with a fairer spread of costs, a new wave of competition-based reforms – for example, of the electricity industries in NSW and Queensland – could improve services and protect profits from rapacious state treasurers so they can be ploughed into infrastructure."
The article then goes on to pinpoint the underlying reason for the sorry state of affairs:
"The problem with the states is not their aversion to debt. It is that they have splurged a fiscal bonanza on pay increases for public-sector workers that have not been earned by productivity improvements. Public sector employees still get away with work practices their private sector cousins relinquished years ago – and that, as much as infrastructure problems, explains the crisis in services. Helped along by the property boom and the GST, the state Labor governments have opened their wallets to their unionised workers while still reducing underlying debt. Something had to give, and the evidence before our eyes suggests that in many cases it was infrastructure. "
It's a point that is worth repeating. In the absence of the discipline of competition and the free market, any business ends up becoming a captive of producer interests. In the case of public services, this means the unions and the bureaucracy. As a result, the customers (ie the public) end up getting inferior services and poor value for money. While the Randian ideal of governments only providing law and order and defence of the realm may not be attainable, the taxpayer and the ordinary citizen would be far better off if we moved in that direction. Governments aren't any good at running businesses and they should get out of trying to do so.
I've commented before on the problems with various public services, particularly in NSW (don't mention the trains!). From today's editorial pages of "The Australian":
"It is true that everywhere we look in Australia we see a crisis in the delivery of services. Commuters on Sydney railway platforms gaze forlornly up the tracks for trains that do not arrive. Public patients languish on year-long elective surgery waiting lists. Power outages have hit every state except NSW and Tasmania and most of the states are in the grip of water restrictions. Perhaps most tellingly, parents are fleeing the public education system, no longer confident it can give their children the skills – and values – they deserve. Meanwhile, infrastructure lobby groups point to a long-term reduction in capital spending by governments and argue this is dampening growth by as much as 1 per cent of GDP per year. But alarmist projections by groups that stand to gain directly from a taxpayer-financed infrastructure boom should be treated cautiously. Part of the overall reduction in public infrastructure spending is the result of the privatisation programs of the 1980s and 1990s. And just as those programs have led to more efficient delivery of services with a fairer spread of costs, a new wave of competition-based reforms – for example, of the electricity industries in NSW and Queensland – could improve services and protect profits from rapacious state treasurers so they can be ploughed into infrastructure."
The article then goes on to pinpoint the underlying reason for the sorry state of affairs:
"The problem with the states is not their aversion to debt. It is that they have splurged a fiscal bonanza on pay increases for public-sector workers that have not been earned by productivity improvements. Public sector employees still get away with work practices their private sector cousins relinquished years ago – and that, as much as infrastructure problems, explains the crisis in services. Helped along by the property boom and the GST, the state Labor governments have opened their wallets to their unionised workers while still reducing underlying debt. Something had to give, and the evidence before our eyes suggests that in many cases it was infrastructure. "
It's a point that is worth repeating. In the absence of the discipline of competition and the free market, any business ends up becoming a captive of producer interests. In the case of public services, this means the unions and the bureaucracy. As a result, the customers (ie the public) end up getting inferior services and poor value for money. While the Randian ideal of governments only providing law and order and defence of the realm may not be attainable, the taxpayer and the ordinary citizen would be far better off if we moved in that direction. Governments aren't any good at running businesses and they should get out of trying to do so.
posted by Kevin Francis at
6:18 pm
