Talking up government

Last year Nigel Lawson, the former British chancellor of the exchequer (and father of Nigella) visited Australia.

During his stay, he remarked on the similarities between the electorates of Australia and Britain.  He said that in each country "people think that government is both omnipotent and useless".

Such a belief is understandable.  Since the rise of the welfare state, governments have peddled the fiction of their omnipotence.  While governments present themselves as all-powerful, we now have regulatory agencies presenting themselves as all-knowing.

The problem with the idea that government is omnipotent is not only that it creates unreasonable expectations of government.  Worse, it perpetuates the idea that if government can't fix a problem, then the government hasn't tried hard enough.

Take interest rates and inflation.  Unless a federal government does something momentously disastrous the reality is that, in the short term, anything a government does will only have an effect at the margin.  But no politician will admit they can't control interest rates.  In order to maintain the pretence of their omnipotence, politicians are reduced to intimidating bank executives.  In the wake of this week's interest rates rise we had the spectacle of ministers giving advice on how to change bank accounts.

It's possible to feel a degree of sympathy for Wayne Swan.  He's inherited an electorate that over the past decade has been conditioned into believing something quite different from the reality.  The Howard government spent a decade convincing voters that it had the power to keep interest rates low.  And voters believed it.

Whether it was true or not was not the point.  In a modern globalised economy such as ours, prime ministers and treasurers have nowhere near the power over economic outcomes they claim.

Few politicians want to follow the claims about interest rates to their logical conclusion.  If governments take the credit for low interest rates, they must accept the blame when rates rise.

Of course this isn't what happens.  At the last election there was much discussion of the "me-tooism" of Labor's campaign.  Nowhere was this more apparent than in economic policy.

Labor readily agreed with the coalition that the federal government had as much power over interest rates and inflation as John Howard claimed.  For the ALP to admit otherwise would have been an act of quite some political courage.

Such an admission would have prompted voters to ask "if governments don't control interest rates, what are governments for?"  It would also have been a reversal of a century of ideology.

After all, it has been the left of politics that has argued for government as the solution to any problem, while the right is supposed to be the side that cautions against believing that the state has the answer for everything.

Kevin Rudd and Swan are now suffering the consequences of what they failed to do.  Labor will spend the next 12 months blaming the former government for the level of inflation and interest rates.  But voters don't care much who is at fault.  To them all that matters is that "the government" should fix the problem.  And if one particular government doesn't fix the situation, voters might try the alternative.

Although in retrospect the coalition could have managed the interest rate question differently, it never guaranteed cheap groceries and cheap petrol.

Labor's ambition in relation to the price of groceries and petrol knows no bounds, and it takes the concept of government omnipotence to a whole new level.  Labor will of course argue that it promised no such thing as cheap groceries and cheap petrol -- and technically it didn't.  But it's the perception that counts.

Labor's fixation with grocery prices has led it to ask the Australian Competition and Consumer Commission not only to examine the level of competition in the supermarket industry, but also to investigate things like the feasibility of establishing a special website to provide information to the public on the costs of groceries.

As important as the price of groceries is, it's not clear why it should be the responsibility of government to tell consumers what the price of bread is.

Supermarkets themselves do a pretty good job at communicating the prices of their products.  Household letterboxes are stuffed full of supermarket advertising.

It's one thing for Labor in opposition to talk about "working families" paying more for their groceries.  But it's something else entirely when Labor in government believes itself so powerful it can control the price of bananas.

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