Much of the recent breast beating about the problems of the "bush" has rather suggested that governments should "do more" for the bush, particularly for the dying small towns which litter rural Australia.
Unfortunately, what is killing those small towns is better cars and roads. Regional centres (many of which are thriving) have better shopping, so country people get in their better cars, travel along their improved roads, and bypass their local small towns.
It is the consumer preferences of country people that have the biggest single impact on the viability of small towns. Those towns were largely created by the limitations of the transport technology of the time -- horses and bullock drays -- and they are being destroyed by the transport and communications technology of today. Which is not to say that innovative things cannot be done with common services centres and so forth. Even so, many small towns are beyond salvaging.
There are only two bases for sustainable prosperity. One is the path of independence: to provide goods and services that people wish to buy at prices they are willing to pay. The other is to live off others by coercing or begging an income from them.
The first is the path of an independent citizenry. The second is the path of the master, gangster or mendicant.
The last 25 years has seen a great growth in mendicancy. Government expenditure on health, education and welfare has grown from about 11 per cent of GDP to over 20 per cent: a surge in resources no other sector can even begin to match. About 30 per cent of those aged 15 and over depend on transfers from government for their income.
The individual returns on this are not good, however. At least, not for the recipients -- as is both normal and inevitable, the greatest individual returns from such expenditure have gone to the administrators of the programmes themselves. (Canberra does rather well out of welfare expenditure).
So, from experience, mendicancy is not a basis for rural prosperity. Nor, of course, could it be expected to be. The rest of Australia is hardly going willingly to share enough of the income garnered from actually producing things to support small-town Australia in the life to which it might like to become accustomed. The life of a rentier can be very pleasant, but one actually has to have the assets in the first place from which to live. Pity is just not enough of an asset, even pity dressed up as "fairness".
Why is small town Australia different? Why it should be particularly regarded as so special, that the rest of the country has to guarantee its prosperity? A difficult case to make.
Particularly when there are so many already in the mendicancy queue. Many complain about the retreat of government, yet the period since the election of Whitlam Government has seen the greatest growth in government in Australia's peace-time.
But what about de-regulation and privatisation? Yes, indeed, what about them? They have been mere tactical retreats in an attempt to sustain government's strategic advance. It is perfectly true that specific markets have been de-regulated, but only in an attempt (largely successful) to increase the efficiency of said markets so that the economy can more easily sustain the ever-spiraling tax burden. When Gough Whitlam was elected PM, 23 per cent GDP was taken in taxes: it is now 31 per cent. Taxes per Australian have more than doubled in real terms. Taxes impose costs considerably beyond their apparent level -- costs in compliance, costs in all the economic activity rendered non-viable, costs in diversion of resources. To have an increasing proportion of one's income taken in taxes is also rather more bearable if said income is rising more rapidly. Hence an expanding government's increased interest in economic efficiency.
As for privatisation, partly that was in the same (again largely successful) search for increased economic efficiency. But it was at least as much driven by government welfare expenditure. Revenues may have been going up, but expenditure went up faster. Government rates of saving collapsed and then went into negative. Debts mounted. Asset sales become a necessary part of the fiscal spring-cleaning.
As governments desperately look for ways to pay for the voracious fiscal monster that is the Australian welfare state they have become less and less impressed with mendicant industries and regions. The job of industry is to produce wealth that can be taxed to pay for welfare spending, not to be a burden on other industries.
Besides, the tariff-cutting policy has been successful. Indeed, polling shows the popular approval of Australian car makers (historically, very low) has risen steadily as the quality of their product improves under the pressure of increased competition. It is quite clear from the long-run economic data, that trade protection is particularly damaging to small economies, as it deprives them of the benefit of economies of scale and scope in the global market (the only ones they can have access to) while their small markets more easily fall prey to exploitative monopolies and cartels.
But the would-be mendicant can always find reasons why they should be blessed with more of others' income: so people demand new subsidies to compensate for the withdrawal of old privilege via National Competition Policy -- or else, that the privileges not be withdrawn in the first place. Unfortunately for such hopes, there are far too many claimants in the queue already. All those people on unemployment benefits, sole parents, disability pensions, student benefits, academics, hospitals, Medicare, child care, indigenous Australians, the arts, and so on.
Many advocates of "doing something" about small town Australia think that the rest of Australia should live on their efforts, and small town Australia should live on those efforts too. Piggy-backing along for the ride. Not a goer, I am afraid, not even as a generous "top up".
Nor will economic reform be abandoned. Not only does the fiscal pressure continue, driving governments down the reform path, the reforms have been successful. The Asian economic crises represents the first time in over a century that Australia has performed better than comparable countries in a global economic downturn. Not only that, but Australia has managed the almost unheard of feat in a developed economy of generating a systematically increased rate of productivity growth -- such growth being the necessary basis of mass prosperity.
No wonder noted MIT economist and commentator Paul Krugman has been calling Australia "the miracle economy" and the Japanese have been sending ministerial delegations to find out how we got it right when they got it so wrong.
Then again, having about halved its net national wealth does suggest Japan needs to do some soul-searching. Indeed, net wealth losses from the bursting of the Japanese "bubble economy" are about twice the value (adjusted for inflation) of all the property damage done to Japan by American bombing in WWII. This time, however, far from costing the Americans, there was actually a major wealth transfer from Japan to the US as Americans bought back assets they had sold much more expensively.
Nor have the poor got poorer, nor has income inequality increased.
As the work of Professor Ann Harding from the University of Canberra shows, once one adjusts for tax, transfer and household composition changes, the average incomes of the lowest groups have gone up with little change in overall income distribution patterns. Professor Harding found that, from 1982 to 1993/94, the income of the bottom two-tenths increased $17 and $19 a week while the income of the top tenth increased $8 per week.
Those who wish to contribute to the rural revival might consider how it could build on its strengths and improve its weaknesses. The begging bowl is not a basis for rural prosperity. Much better to be one of those being importuned for charity rather than doing the asking.
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