The small government myth


Politicians are a strange breed. They will spend millions at election time attempting to convince you that their side is better than the other because they will better manage the country. They will also tell you that they have irreconcilable differences with their opponents and in essence, it’s their way or the highway.

Of course the reality is somewhat different. In the past few weeks the Australian public have observed the farce of an overnight Senate sitting when the Greens and the LNP had already come to a deal to pass the legislation at the root of the so called angst. Sure, the politicians ‘signed up’ for this childlike behaviour to prove political points and lay down a perception of what they and other parties are alleged to stand for.

The people who staff the Senate chamber, the Comcar drivers and so on would not be in a mood to appreciate the political and ‘image’ benefits of this action - they were missing their kids’ bedtime, a dinner date, coaching the Under 14’s sporting team - because they were hanging around all night just in case the Senators came to a realisation at 2am that bed was really a better idea than reinforcing the ‘narrative’ that they were better than ‘the other guy’ to a really small group of people, as most really didn’t care.

Let’s call the farce for what it is – marketing. Somehow the behaviour in the Senate was supposed to convince you to change your vote – just like a toothpaste advertisement on TV is supposed to convince you that Brand X will clean your teeth so well, you’ll exceed your wildest dreams. Was it successful – probably not in any meaningful way. But the entire cohort of Senators contributed. You could suggest that they are all the same.

There is however a difference between the respective mindsets of the two major political parties in Australia. In the 1980s, the Hawke Government hosted a summit in Parliament House. The outcome was a consensus decision that for Australia to grow holistically, all sections of the community must make some of the changes and reap some of the rewards for the changes made. Part of the success of the package – known as the Accord was the agreement between industry, unions and the government to pursue economic and cultural growth.

The Accord lasted most of the Hawke and Keating government era and to be fair a lot of the work undertaken by Hawke and his treasurer Keating set the country up for the impressive run of economic growth that has occurred since – even during the tech wreck and GFC that pulled a lot of other similar economies into recession in the past 20 years.

Keating’s ALP lost to Howard’s Liberal/National Coalition in 1996. The Hawke Accord had at its heart the concept that if the economy grew, all should receive some direct benefit from the growth. Howard tried a different tack:
Official statistics show that between the time Howard came to power in March 1996 and the time he lost office in December 2007, per person household incomes grew by about 25 per cent in real terms. But when you dig a little deeper, things look less rosy, for the rising economic tide did not lift all boats by the same amount.

Economic inequality grew through that period, as did relative income poverty, says Professor Peter Whiteford of the ANU’s Crawford School of Public Policy.

Household income for the top 10 per cent went up 60 per cent.

“It was the highest for any OECD country for the period,” says Whiteford.
For the median household, it went up about 53 per cent. For the poorest 10 per cent, it went up about 37 per cent.

So the story is that everyone did better, but the rich did much better. It was the economic boom that drove incomes higher, but it was primarily the government’s approach to tax and welfare policy that caused the inequality.
One example of Howard’s methods was the replacement of the federally operated Commonwealth Employment Service (CES) with the ‘Job Network’. Whiteford in the article linked above claims:
The introduction of the Job Network saw the stripping out of about $1 billion of assistance for people unemployed long term.

There was the welfare-to-work policy that shifted single parents and people with disability off to the lower Newstart allowance.

They redirected money away from those on working-age benefits towards older people generally, and particularly the upper middle class.
Apparently Howard also wanted to introduce income splitting (where the earner of the majority of household income could gift some of it to the lesser earner and reduce both party’s income tax liability) but didn’t win the argument within the Government. It fits with his traditional views of the husband being in the workforce and the wife staying at home and ‘homemaking’.

To be fair Hawke and Keating also enthusiastically privatised some functions of Government. However, generally the businesses that Hawke/Keating privatised were stand alone operations where the public were encouraged to (re)purchase some of the equity in the business. Howard’s concept was to invite existing private enterprises and some non-profit organisations to initially compete with and then completely take over the operation of government services – such as the CES or the current proposal for the privatisation of the payment of benefits incurred by Medicare.

This brings about a fundamental question of government in general – what is it there for? Should government take an active role in society to attempt to equalise as far as possible the expectations of those in the society (sometimes termed ‘big government’), or should it be a body that enables private enterprise to provide services while providing some oversight (sometimes known as ‘small government’)?

While both concepts will certainly increase the wealth of parts of the community, which one is fairer to all those who live in a society? Clearly the Howard era Coalition government were firm believers in enabling private enterprise – as those who had the financial and intellectual capital to become part of say the Job Network couldn’t set themselves up in business on a ‘wing and a prayer’ – rather they needed sufficient staff, business systems and so on to meet the government’s Key Performance Indicators (KPIs).

While the theory that once those who had the financial and intellectual capital would support those on lesser incomes and innovate to ensure that the service was provided at a lesser cost than the Government could do it, the reality was somewhat different. If you think about it for a minute, the number of people that apply, choose not to apply, choose to actively seek work or those that don’t really doesn’t matter. So it really doesn’t matter how job ready people are, how many job applications they have prepared in the past week, or if they have completed a thousand how to get a job courses, unless an employer really wants to offer anyone a job, the job isn’t available.

Because is it admittedly difficult to measure if a local business has an opening for another worker or Woollies is opening a new store in Upper Timbucktoo West in nine months’ time, the Government has to justify the decision and demonstrate that the system works in another way. So we again look at KPIs – only the indicator this time is how many jobs people have applied for, how many contact hours they have with their job councillor and so on which ultimately is meaningless.

Rather than attempting to measure how we as a nation are increasing the common wealth of all citizens which will lead to jobs being created for those who need them, we pay the Job Network providers to produce courses and measure success rates of those who are, in a lot of cases, victims of their own circumstance. Most people who are unemployed really do want to do meaningful work – even if it is at the local Meals on Wheels or other volunteer organisation. In fact, you could argue that if government was actually looking after its citizens effectively, organisations such as Meals on Wheels would not be necessary.

Really, there is a whole new bureaucracy formed, but because none of them are public servants, the Coalition government claims they don’t interfere in business, they don’t have a bloated bureaucracy and they are driving a small government agenda. If members of the Job Network can demonstrate that people are job ready, they get paid – regardless of the actual success in getting people into work. A 2007 report discussed the problems of the Job Network providers being motivated by profit rather than an objective of finding a job for all who want one.

Small government seems to be a mantra of the conservative chattering classes. The gold standard in middle and upper income support from Government is the Howard Costello years with the generous family benefits, frequent tax cuts and so on. It’s all very well for the government to support the better off, but if the government looks at applying stimulus to an entire community there is hell to pay.

You may remember that one of the Rudd government’s targeted measures to ensure Australia didn’t become a victim of the late noughties Global Financial Crisis was the delivery of a means tested $950 to most taxpayers in Australia. The theory being that regardless of how the money was spent (as opposed to saved), there would be a benefit and demand generation in the economy. Stories abounded of large screen televisions being out of stock, or the increased takings at the local TAB or pokies palace. Thinking about it for a minute, the electronics stores and pokie places also employ people who get to keep their job and pay as a result of the continual revenue created in their place of work – and the staff then buy such luxuries as food, petrol, tyres and maybe a night out at the movies themselves. Then the people who work at the food and petrol shops then get to keep a job and spend money and the process continues.

If anything Rudd’s $950 no strings attached cheques favoured those on a lower income as $900 is a greater proportion of someone’s annual income if they are on $50,000 per annum than it would be for someone on $100,000 per annum. However, the criticism was effectively suggesting those on a lower income didn’t have the right to make expenditure decisions.

It seems the fundamental question does have an answer. If we want to allow those who already have considerable financial resources and influence to further increase their wealth, we support the actions of conservative governments, as the Howard era statistics above demonstrate. The small government mantra is as much of a myth as the concept of trickle down economics that has been previously discussed here on The Political Sword.

When the Republican Governor in Utah can understand that direct assistance to those in need (in this case giving them a roof over their head) is a good use of public funds as discussed in this article we published last May, why does our federal government choose to continue to believe that company tax cuts, seeking bids to run government services and not considering any change to benefits enjoyed by the better off is an acceptable practice in 2016?

Let’s finish with the words of Tim Dunlop writing on the ABC’s The Drum website
In other words, by hiding behind the rhetoric of "small government" the right has managed to co-opt the functions of the state and bend them to the benefit of private firms and individuals at the expense of the majority of citizens.

We are told government has to cut back on health, education, childcare, infrastructure and other public services, while public money is funnelled to private businesses. All under the guise of "small government".

It is the ultimate democratic sucker punch.


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3/04/20162353NM You have exposed another myth that the LNP likes to perpetuate. It talks a lot about ‘small government’, as do its conservative counterparts worldwide. As you point out, the truth of the matter is not just that they do not run a ‘small government’ but that the main beneficiaries reside at the top end of town. Far from ‘small government’ as a mechanism for reducing government expenditure and easing regulation, the so-called ‘red tape’, it has become the opposite. To the LNP, ‘small government’ has meant reducing benefits to those who most need them, and cutting back on support for education and healthcare. Isn’t it amazing how conservatives continue to perpetrate the ‘small government’ myth, even in the face of actions that achieve the opposite? Which shows again that truth is irrelevant; it’s perceptions that count. So long as voters don’t ask whether the ‘small government’ assertion is really true, they go on believing it is. I hope your piece puts some on them right.

Kronomex

3/04/2016As government becomes "smaller" will we see a decrease in the amount of politicians gorging at the taxpayer funded feeding troughs? Somehow the answer will be "No."

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I have two politicians and add 2 more; how many are there?