The Government We Deserve

There is, for some unknown reason, a belief by many that regulator’s and public servant’s principle interest is the public good.  For these people, TAFKAS is offering to sell them BridgeCoins; a tokenised crypto distributed ledger investment over a famous Sydney Bridge with registry, custody, trading and payments managed in Nigeria.

Thomas Sowell tells a wonderful story of what caused him to change his world view from Marxism to Capitalsm, despite having complete his Masters at Columbia University and his PhD at the University of Chicago under the supervision of Milton Friedman.

The story goes that Sowell was working at the US Department of Labor and they were trying to work out the impact of minimum wage regulations in Puerto Rico – because that part of the Department set and regulated the minimum wage in Puerto Rico.  Sowell came up with a research methodology that would provide evidence – one way or the other.

His Departmental colleagues refused to undertake the research, because if the research evidenced that minimum wage regulation did not work, all the Department employees would themselves be out of work.  And you can’t have that.  It is better to have poverty and unemployment in Puerto Rico than to force redundant public servants into productive employment.

Public servants and regulators, like the rest of us, are human.  We are lazy and act in self interest.  There is no special “leave your self interested here” cupboard at the entry of every government department.

Paul Keating used to frequently quote Jack Lang who used to say:

In the race of life, always back self-interest — at least you know it’s trying.

Public servants have no special morality and no special insights.  They may have better data, but they does not make them oracles.  Please note this all those who put agencies, such as the Treasury and the RBA, on virtuous all knowing pedestals.

This should not be news to most.  This is why we try to constrain the public service and the regulatory state through little things like budget controls and parliamentary accountability.  Unfortunately though, the gene pool of our political and legislative class has been materially diluted.  They seem to think it is fine and proper to give near unfettered power and resources to bureaucrats and regulators.  Because it is all too complex for them.

Take for example this little speech by APRA Executive Board Member Geoff Summerhayes to the Members Health Directors Professional Development Program – basically the directors of private health funds:

We’re on the record expressing our disappointment about the industry’s progress responding to the sustainability challenge, with too many PHIs seemingly waiting for the Government to find a miracle cure. In response, we asked all insurers to submit a robust, proactive recovery plan, including a “Plan B”, with “at risk” PHIs asked to sound out a potential merger partner in case their plan isn’t successful.

APRA is disappointed it seems.  Poor petals.

Apparently, a bunch of health funds are at risk because they can’t increase their prices (because the government won’t allow them) and because the government has significant impact on their costs (through Medicare scheduled fees and other regulatory controls).  And because the government has a material impact on the conduct of their business, they are waiting for the government to help them.  How dumb of them.

But wait.  The regulator wants them to merge and combine to solve all these problems.  Because cutting out a minuscule amount of administrative costs will solve all their problems.  Lord knows what the ACCC would think of one of their regulatory peers directing the industry structure of the health insurance industry.  What if the ACCC had a problem with such a directed merger?  Who would win the battle of the Regulatory Commissars?

Perhaps Mr Summerhayes thought he was being to subtle in his message so he repeated:

I have previously said that a ‘Plan B’ should be considered as part of the strategy for PHIs – and this was also part of APRA’s message to insurers last year. APRA made clear that ‘at risk’ insurers should consider potential merger partners, and start discussions early, to put them in a stronger position to act quickly if their position becomes unviable. This level of preparedness not only benefits the PHI, but more importantly, helps to protect its policyholders.

TAFKAS was not present at this speech but wonders if there was some tut tutting and finger wagging from Summerhayes when he read this part.

But here is the essence.  Why does APRA want mergers?  Is it to ensure a better health insurance product for customers?  Probably not.  It is to make APRA’s life easier.

The dream of a regulator is to have a couple of large, fat, lazy and uncompetitive entities to regulate.  They are profitable, at the expense of consumers, so they pay taxes to feed the beast.  They are compliant.  They don’t innovate.  They are predictable.

You know.  Like the Australian banks who APRA also regulates and generally protects from competition.

Much like Sowell’s Department of Labor.  You can’t have competition and satisfied customers if it makes the life of regulators more difficult.

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11 Responses to The Government We Deserve

  1. Spurgeon Monkfish III

    They may have better data

    And if they don’t, they’ll just fabricate some. See Perfesser Davidson’s work on tobacco consumption rates, for example.

  2. Roger

    There is, for some unknown reason, a belief by many that regulator’s and public servant’s principle interest is the public good.

    Plural possessives please: regulators’ and public servants’

    Even better:

    There is, for some unknown reason, a belief held by many that the principle interest of regulators and public servants is the public good.

  3. nb

    That would be the Lang who tried to outlaw criticism of the government. At least he knew why!

  4. Ƶĩppʯ (ȊꞪꞨV)

    His Departmental colleagues refused to undertake the research, because if the research evidenced that minimum wage regulation did not work, all the Department employees would themselves be out of work. And you can’t have that. It is better to have poverty and unemployment in Puerto Rico than to force redundant public servants into productive employment.

    this is why government depts must be back burnt on a regular basis

  5. Val Majkus

    had to look up that quote about getting the government it deserves as I recall many moons ago reading it in a book by I think Trotsky, in that case about the people of Poland … this is the quote

    Every nation gets the government it deserves.

    initially attributed to Joseph de Maistre (1 April 1753 – 26 February 1821) a Savoyard lawyer, diplomat, writer, and philosopher

    Letter 76, on the topic of Russia’s new constitutional laws (27 August 1811); published in Lettres et Opuscules. The English translation has several variations, including “Every country has the government it deserves” and “In a democracy people get the leaders they deserve.” The quote is popularly misattributed to better-known commentators such as Alexis de Tocqueville and Abraham Lincoln.

  6. ACTOldFart

    And it is ‘principal’ not ‘principle’

  7. H B Bear

    No better example of the regulator and the regulated than APRA and the four pillars banks.

    Remind me how that ended up.

  8. MACK

    “The dream of a regulator is to have a couple of large, fat, lazy and uncompetitive entities to regulate.”
    This is 100% true. A few big boys are forced to tango with the regulators or they will come under more regulations specifically designed to make life tough. In any case, they just pass on the extra costs to the customers. The smaller guys say (1) bugger off or you’ll send me broke, forcing me to sack people live on commercial television and (2) I’m going to complain to my local MP about you.

  9. Spurgeon Monkfish III

    Remind me how that ended up.

    Interest rates that may actually be less than zero (according to various fringe anti-bank crackpots), the banks zealously guarding your cash for your own good according to world’s (and history’s) best practice and additional Morristeen government legislation that criminalises you attempting use it anyway. Eventually, the installation of a PRC style “social credit ranking system” that can vaporise your nominal savings in an instant, again, for your own good and the good of your family, your kiddies and the Glorious Peoples’ Democratic Republic of VenOztraliastan.

    Happy daze!

  10. Squirrel

    “There is no special “leave your self interested here” cupboard at the entry of every government department.”

    Indeed – if you look beyond the window-dressing, trends in public administration which are presented as delivering better value for money etc. are often at least as much about distancing politicians and their courtiers from any real accountability and responsibility for the delivery of day to day services which people actually care about.

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