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.
This raised the ire of the Courier Mail which published an op ed defending the public service and damning the IPA as being to the right of Ghengis. Poor lost souls!
The article raises the twin issues of efficiency and excessive government size.
Regarding the size of governments we have reached a stage when the people can vote themselves ever increasing shares of the income created by producers, and have political parties instructing them on how to do it. Democracy was never supposed to be like this and if left alone can end up eating productive capacity and incentives and creating an ever-growing class of indolents.
It is time for constitutional limits to be set which place a ceiling on how much an individual can be taxed (and how much debt can be run up)
Alan Moran
11 Sep 12 at 3:48 pm
I propose a 15% of national income cap, funded by a GST with a 10% cap, a 5% royalty tax with a 5% cap and a LVT with a 2% cap, subject to a TABOR.
The other problem is that deadweight losses from tax increase as the tax rate on each tax increases. The size and inefficiency of Government thus becomes multiplicative.
.
11 Sep 12 at 3:50 pm
I would like to see the efficiency problem dealt with by greater democratic control. This would involve:
1. All public service positions to be filled by labour hire firms.
2. Vendor selection is to be by universal suffrage with a proportional vote. Allocation of specific positions to firms would still be at ministerial discretion, but salary totals must follow the vote.
3. All relevant information subject to FOI.
I like to imagine the effect on the ABC newsroom if this ever came in.
2dogs
11 Sep 12 at 7:45 pm
The Labor government borrowed an additional $10,050,115,000 in August – over $325 million per day in that month. It owes more than $244 trillion, about $10,500 per capita.
Cumulative growth in that debt has been 1.7% per month – per month – since November 2010.
What fabulously productive effort is that money funding? None. It pays for the pet projects of the public service fiefdoms and of the specialised cheer squads lobbying on behalf of the fiefdoms.
You’ve seen how the fortunate slobs of the QLD public service have mobilised to deny Newman’s cost cutting, sacking just 7% of their numbers. Tonight on the TV news we’re told the poor petals are traumatised and being attended by social workers (for whom I pay).
They ought to be marching up and down protesting outside Comrade Anna Bligh’s new digs in Sydney, or preferably at Wacol Prison, where a company director who mismanaged as profoundly as her would end up.
One can only but imagine the difficulty of the task facing the LNP in taking these public service fiefdoms off the engorged public teat they’ve come to expect. I fear it will be bloody near impossible – the NSW and VIC premiers have already shown no enthusiasm for the task.
Ten trillion dollars extra borrowed in just one month? We’re in deep trouble.
Mick Gold Coast QLD
11 Sep 12 at 8:16 pm
Oooops – was that Mick who put that “trillion” word in every place where I should have said “billion”?
As dimwitted as that is I could readily land myself a public service job!
Mick Gold Coast QLD
11 Sep 12 at 8:39 pm
Don’t you just love the Qld public service union spokesman who appears each night on TV?
Fat, soft looking bastard who doesn’t look like he’s ever done a hard day’s work.
Eyrie
12 Sep 12 at 8:11 am
The monopolists were exposed to competition, as a result the quality of services provided increased manifold and the cost of goods also fell.
Johnny Oneal
20 Sep 12 at 2:29 am