Of all the shameless untruths which disfigure Australian public debate, none is greater than the claim or implication that the welfare state is shrinking. Before Gough Whitlam came to power, expenditure by all levels of government on health, education and welfare was about 10% of GDP. Such expenditure is now over 20% of GDP (or over $6,500 per year per man, woman and child), a growth in resources that no other areas of the economy comes even close to matching.
The breast-beating about cutbacks flow from other factors. In desperate attempts to keep growth in spending somewhere in range of the electorate's willingness to be taxed, policy-makers have been forced to shift resources from areas of declining demand to areas of rising demand. Such cuts make much bigger news than the expansion.
Furthermore, governments now channel almost $10bn a year through non-profit organisations, creating a huge sector always willing to claim that more is needed.
As many of the services of the welfare state are "free", demand exceeds supply, leading to rationing by queue (such as hospital waiting lists). Delivery of services by command-and-control -- the Soviet mode of production -- leads to Soviet-style outcomes in inefficiency and poor quality (particularly in education), creating the impression that the problem is insufficient spending.
The expansion in the welfare state is also implicated in the growth of foreign ownership and foreign debt. The increase in the welfare state under Whitlam led immediately to a collapse in government saving to such an extent that, from the late Fraser Government to the election of the Howard Government (with the exception of Peter Walsh's term as Commonwealth Finance Minister) the Australian government sector funded pensions, salaries and other non-capital expenditure by borrowing money and selling assets. At the same time, inflation (itself a way of funding an expanding welfare state) and increasing tax rates were major factors leading to a slide in private saving. To keep investment up (and to fund welfare on the national bankcard), capital had to be imported. As foreigners don't let us have use of their savings for free, assets were sold and money borrowed -- hence increasing foreign ownership and foreign debt.
Policy makers tried various ways of keeping the show on the road. Fraser and Anthony promised resources booms would save us. The Club of Rome prediction of declining resources such ideas were derived from proved to be nonsense on stilts, based on total ignorance of the economics of resources. Various governments tried public-private partnerships. That led to the disasters of WA Inc, the SA State Bank, VEDC and Tricontinental in Victoria. The Cain-Kirner Government tried pump-priming and ended up in a state of near fiscal-collapse, borrowing money to pay superannuation obligations.
The only path that has shown any sustained success is that of economic reform: of trying to squeeze more economic efficiency out of the economy so it grows faster and is able to better provide the revenue the growing welfare state requires. Hence the pattern of economic reform: corporatisation to squeeze more revenues out of government business enterprises; privatisation to reduce liabilities and increase efficiency; free trade and competition policy to force greater efficiencies.
Mostly it has worked. Productivity growth has improved, government debt has been brought under control, economic growth has moved to about the developed world average -- after being the second-lowest in the developed world for most of the twentieth century.
Unfortunately, the welfare state has not stopped growing, and growing faster than population and faster than the economy. Economic reform to pay for it has become a never-ending race.
Willingness to receive benefits always exceed the willingness to pay for them, and much of the point of welfarism is to separate (or appear to separate) the two. Moreover, since welfarist politics defines the role of the state as to "do good" -- and the range of potential good is infinite -- there are no natural limits to its expansion unless and until the range of things the state is deemed competent to do is accepted as being limited and institutional factors enforce that. Until then, the welfare state is set to keep growing, and to do so faster than revenue.
What is more, by offering "free" alternatives funded by taxation, the welfare state undermines other forms of provisions of such services -- hence the decline of the working-class Friendly Societies of the nineteenth century. More importantly, the steadily increasing nationalisation of the household steadily encroaches on, and undermines, the traditional role of the family in providing social support, pooling risks and intergenerational support.
Moreover, public debate on the issue is deeply mendacious. Shameless untruth is being continuously pumped out by commentators to such an extent that it is just not widely understood that the welfare state has been growing, and that the fiscal pressure that generates has been the main driver of economic reform. Instead, people are fed nonsense about shrinking government and economic reform as some mad, destructive, ideological illusion.
The Australian intelligentsia has become deeply corrupt. The parading of one's finer feelings constantly triumphs over logic, truth or evidence. Attacking "economic rationalism" and beating the welfarist drum are signs of virtue -- and so are too often not subject to proper scrutiny by journalists and academics eager to display their own virtue. Defending market reforms and querying the cost and rise of the welfare state are signs of wickedness -- and so subject to denigration and abuse (so why bother?). The progressivist ascendancy -- Club Virtue -- regularly hijacks public debate in the cause of its own moral vanity. And so people are, understandably, deeply confused about what is going on.
This aggravates the perverse dynamics of economic reform. As UK Labour Peer and economist Lord Desai points out, the welfare state relies on the surplus-producing classes to continue to produce the surplus it lives off. Government is taking more and more from people in taxes and imposing all the insecurities and pressures of increased competition to increase economic efficiency. Yet much of the benefits of those reforms are being siphoned off into paying for the welfare state.
Marginal members of the surplus-producing classes -- many farmers, small-business-people and self-employed plus workers in declining industries -- get the increased taxes and insecurities but don't get much of the benefits. No wonder they get angry.
Meanwhile, they are told that government is shrinking, local services are being cut back and economic reform is being imposed because of mad ideological delusions and meanspiritedness.
If the Constitution was amended to clearly ensure that destruction of property by regulatory action -- including by State governments -- had to be compensated for (a matter of simple justice) this would do much to reduce the angst over economic reform.
As it is, tax-payers get exploited all round. And the intelligentsia -- which is supposed to be explaining to people what is going on in their society -- is systematically pumping out falsehoods at them: exploiting them for its own moral masturbation from -- in Kenneth Slessor's words -- the ecstasies of moral rectitude.
And none of the major parties -- the political polyglots -- has bothered to explain properly to them what is going on.
All that can fuel a lot of electoral revolt.
Added to this is the way that Club Virtue seeks to use cultural issues as the prime vehicles of moral vanity. At least in economic policy, politicians have to deal with real consequences and our economic and business journalists are generally pretty good, so the debate does not get completely corrupted by Club Virtue's posturings.
In issues like immigration, indigenous affairs and multiculturalism, it is much easier for Club Virtue to privatise public debate more or less completely for its own preening. Especially as that handy term of abuse "racist" can be used to silence and denigrate any dissenters. So the public debate in these areas has become almost completely corrupt. The fabricated "secret women's business" was one manifestation of that corruption. The fictional genocide of the "stolen generation" is another. That about 10% of Aboriginal children were separated from their families from 1900 to 1970 is really not that surprising, given the turmoil and disruption that indigenous Australians faced in that period. It is nothing even remotely like a genocide, nor were most of the separated children stolen.
And, if you tell me that intrusive and paternalistic government bureaucracies granted far too much power over people's lives sometimes made bad decisions, I will be less than shocked or, indeed, surprised. But, unlike most of those so keen on expatiating over the issue, I do not actually support intrusive government.
The visiting writer on the Holocaust who asked
What is going on in this country that people cannot tell the difference between taking children away to be educated and the gas chambers?
had not realised how completely the journalists and academics of Club Virtue -- of the progressivist ascendancy -- have hijacked public debate.
The younger members of Club Virtue are products of an education system thoroughly corrupted by the culture of virtue awarding moral vanguard status on the basis of approved attitudes (Soviet-style production is very good at producing propaganda). This encourages, even requires, the submerging of concern with truth, logic, sceptical reasoning or the transmission of culture. The combination expands the ego while it shrinks the mind and creates a mindset largely impervious to dissenting ideas (or even inconvenient truths).
Australia cannot afford the costs of such a corrupt intelligentsia. It is very notable that most of the worst offenders -- academics, government school teachers and the ABC -- are in the public sector. But they are far more shielded from consumer demand and accountability for the quality of their product. This points to at least a partial solution: complete privatisation, with funding for education being channelled completely through students and research grants.
But argument and exposure has to be the key element in the fight back against the corruption of public debate, and of our schools and universities.
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