Yesterday, as I was transiting continents after the conclusion of Mont Pelerin Society’s Prague general meeting, The Australian newspaper published an opinion piece of mine on the need for state governments to reduce their public sector employments. The online version of the piece is available through subscription only (here).
I provide an extract of the piece as follows, referring to the need for the state coalition governments on the eastern seaboard to explain the rationales of their public sector employment rightsizing strategy:
While all three governments when in opposition rightly made the budgetary recklessness of their predecessors an election campaign priority, they failed to take the next step, then and now, to outline why future public sector employment reductions are necessary.
There was no explanation that state bureaucrats are funded by state taxes, or perhaps even by taxpayers in other states through GST redistributions, and that these adversely affect economic activity and private sector growth.
No mention was made of the fact that fewer skilled workers are available to the private sector, where they could be used more productively, when public sector employment expands as it did over the past decade in NSW, Victoria and Queensland by 290,600 people.
There was silence about the way in which extra public policy bureaucrats advising or enforcing taxes and regulations accentuate cost pressures upon private sector businesses and individuals.
Nor did the Coalition parties mention that frontline staff often deliver sub-optimal services, in areas such as education, health care or welfare services, that could be delivered more efficiently by the private sector.
In fact, they concurred with then Labor governments that frontline staff should be preserved as a protected species shielded from the winds of reform.
It is in this deafening silence about the need for public service attrition that public sector unions, and others on the big-government gravy train, fill the vacuum by arguing for the disreputable position that government employment should be either set in stone or even expanded.
The economic burdens of public sector employment growth I refer to in the extract were originally stated by nineteenth-century French classical liberal Charles Dunoyer, in his 1825 book L’Industrie et la morale, considerees dans leur rapports avec la liberte, and faithfully recited in English by Australian historian and liberal scholar David Hart in his PhD thesis (here).
During the period in which Dunoyer wrote majoritarian democracy based on the universal adult voting franchise had not come to fruition. In Dunoyer’s era trade unions as a whole, let alone public sector unions which now dominate the union scene, and IR and policy debates within the public sector, were a product of imagination or in their practical infancy.
Therefore, even Dunoyer did not fully forsee how twenty- and twenty-first century public sector workers, as joint suppliers of governmental outputs (in their work roles) and demanders of governmental outputs (in their voting roles), would conspire to magnify the already heavy economic costs associated with public sector employment.
The economic costs of large government are real and pressing. The fiscal traumas confronting the West shows how growth in the public sector, and its employment, beyond all reasonable proportions sows the seeds of economic stagnation, as the taxpaying public so far remains squeezed by bellicose, yet conservative (!), defenders of existing government size who refuse to relinquish the previously implemented vestiges of creeping socialism.
The big question here is what will democratically elected politicians do about this situation? They have largely allowed the unedifying confrontation between tax-consumers and tax-producers to persist, largely out of electoral fright as the beneficiaries of concentrated benefits tend to scream more loudly than those with the burdens of dispersed benefits placed over their shoulders.
In Australia, though, with non-miners still suffering from post-GFC economic stagnation and as the mining boom reveals every sign of petering out significantly, governments must seriously consider tipping the scales in favour of the productive classes who create the wealth … and quickly.