We will hear a few toned-down echoes of the report of the National
Commission of Audit in Tuesday's budget but, apart from that, the memory
of its more extraordinary proposals is already fading. For most
Coalition backbenchers, that can't come soon enough.
But I think the
audit commission has done us a great service. It has been hugely
instructive. The business people and economists on the commission
offered us a vision of a dystopian future.
It's a view of what
lies at the end of the road the more extreme economic rationalists are
trying to lead us down. If you've ever wondered what life would be like
if we accepted all their advice, now you know.
It would be a
harsher, less caring world, where daily life was more cut-throat, where
the gap between rich and poor widened more rapidly and where the
proportion of households falling below the poverty line increased every
year.
Ah, but think of the advantages: we would have fixed the
budget problem and started getting the public debt down without having
to pay any more tax. And that's not all: we'd be left with a much more
efficient economy.
Are the report's proposals the product of
self-interest or ideology? Fair bit of both. To oversimplify, the
business people would be motivated mainly by self-interest. They don't
tend to be big on ideology - at least, not the sort that's internally
consistent.
The economists, on the other hand, would be driven
mainly by ideology. When you study economics you're taught a simple
model of the way the economy works. It's supposed to be just a useful
analytical tool, but it tends to take over the thinking of those who get
jobs as practising economists. Those who become convinced the simplest
version of this "neo-classical" model holds an equally simple answer to
most economic problems, come up with policy recommendations just like
those in the report.
The self-interest in the report is easily
seen: it would fix the budget problem - and, don't be in any doubt,
there is a problem - by taking money from low income-earners and
middle income-earners, but not high income-earners.
The report
fits perfectly with a wry observation from John Kenneth Galbraith, as
paraphrased by the late John Button: "The rich need more money as an
incentive and the poor need less money as an incentive."
But if
you want to understand the ideology behind the report - what prompted
the economists on the commission to advocate the harsh measures they did
- you need to know a little about the strengths and weaknesses of the
simple neoclassical model that fundamentalist economists take as their
infallible guide.
It assumes that pretty much all you need to know
about the economic dimension of our lives is that markets work by
allowing prices to adjust and thereby bring the demand for and the
supply of particular goods or services into balance. Except in rare
cases, the main thing that would stop this process keeping the economy
in balance and working well is government meddling in the market.
So
the model predisposes those who take it literally to believe the less
governments do the better. Government needs to be as small as possible,
so if government spending exceeds its revenue from taxes, the only
acceptable answer is to cut spending to fit. To solve the problem by
increasing taxes would damage the economy.
The model is built on
various assumptions. One is that all of us are "rational" (hard-headed,
with perfect self-control), so we don't need governments stopping us
doing destructive things (such as smoking or becoming obese) or even
using payments to nudge us in the right direction. Indeed, we'd all be
better off if governments gave us more freedom (and thus didn't need to
make us pay so much tax).
Two other key assumptions are that we
all operate as individuals and that what makes the economy work
efficiently is competition between us. So the model casts aside the
possibility that we're social animals who identify with groups and like
acting in groups, even groups as large as "the community". Nor does it
have any place for the possibility that sometimes co-operation between
us gets better results than competition between us.
It assumes the
notion of "shared responsibility" - of using the budget to require the
well-off to subsidise the less well-off - could only discourage the poor
from standing on their own feet and so make things worse on both sides
of the deal.
This explains why the report's main savings come from
making even tighter the already very tight means-testing of access to
government benefits. It would abandon Medicare's most fundamental
principle of universality - treating everybody equally and paying for
the system via general taxation - to introduce co-payments and
means-testing.
The model further implies that the more aspects of
our lives that are run on market principles the better off we'll be. So
it advocates greater competition between public and private schools,
public and private hospitals, private health funds, universities and
private education providers (as well as among big and small unis) and
between rich states and poor states (South Australia and Tasmania).
It's
change that would move us from one person, one vote towards one dollar,
one vote. For those of us who have lots of dollars, what a paradise it
would be.
