QUICK-off-the-mark media analysis following the dreadful consequences of the Rudd government's home insulation program has focused on the policy and the politicians.
If this was just a matter of amateur behaviour from junior ministers such as Peter Garrett, we could breathe easy that they might at least learn from their mistakes.
But the problem is not just about crude and clumsy policy, or lousy implementation of it, from ministers out of their depth. Nor is it just about a Prime Minister so high on hubris and hypocrisy that he talks about evidence-based policy and then pursues hasty stimulus spending and giant national broadband networks with precious little underlying analysis.
The insulation program is just one example of a bigger problem. It is about political philosophy; about the Rudd government's firming commitment to big government. Here is a textbook lesson in what happens when government throws money at industries they don't understand and have no business being in. In short, we are learning that the bigger the government, the bigger the problems.
Deservedly so, Environment Minister Garrett has come under sharp attack during the past few weeks. His maladministration of the housing insulation program led to four deaths and more than 90 house fires. It was obvious that a government honey pot of $2.4 billion to insulate 2.7 million homes would attract shonks, fraudsters and untrained workers looking to make a quick buck.
But Garrett's ineptitude is not the core problem. He is part of a government that is, on a number of fronts, committed to interfering in markets with no understanding of the consequences. That firm belief that governments must intervene meant Garrett only requested a copy of a damning analysis of the home insulation program by Minter Ellison 10 months after it went to the Prime Minister's Office and Garrett's own department.
Consider the full consequences. Billions of taxpayer dollars and hasty timetables led to deaths and fires. Government intervention has created an entire new industry of auditors to check 1000 homes potentially electrically alive with foil insulation and 225,000 more homes that could have safety and quality problems. It has also created a new market for electricians sent in to fix the problems who will be tempted to raise their prices in accordance with rising demand for their services. And when the government canned the program last week, thousands of people -- most of them legitimate, trained workers -- were left without work in an industry in limbo until the government's next program commences.
We are watching an eternal lesson unfold: in myriad ways, government intrusion has distorted a market that previously worked well. When government applies pressure to one part of that distorted market, trying to fix problems it created and by replacing the scheme with another, bubbles emerge in other places.
In other areas, too, the Rudd government has, inadvertently, taken us right back to first principles about government intervention. Consider the $14.7bn Building the Education Revolution package to build a new building in every Australian primary school. In the name of stimulus spending to create jobs, tight deadlines have attracted expensive cost premiums from builders and sub-contractors understandably making hay while the government sun shines. Some projects are being done without normal tendering processes, removing normal price competition. Misguided template processes have resulted in some schools getting buildings they don't need. But this is not just about overpriced buildings.
Government interference has distorted the construction market. Any builder doing BER work will tell you, just quietly, that skyrocketing demand for contractors has led to ramped up prices. And when that happens, commercial project planners will look twice before entering the market until prices are more affordable. In other words, when governments step in, others step out.
On ABC1's Insiders program, Communications Minister Stephen Conroy made no bones about the government's big agenda after more than a decade out of office. It is now obvious that the government's "do something" agenda is underpinned by a political philosophy based on big government micro-managing the economy. Its decision to pick winners in the car industry by pumping money into a so-called Green Car is nothing more than an old-fashioned government handout: $43 million to Ford to build a new four-cylinder engine for its cars.
Equally misguided is the government's $43bn decision to fund a national broadband network. The government has not presented a business case, modelling or even a basic cost/benefit analysis. It has no idea about private sector interest or take-up rates by consumers. In other words, no idea about the real cost to taxpayers. Just the firm commitment that government ought to provide broadband in a fast-moving industry where Google in the US is already talking about delivering fibre optic speeds of one gigabit per second, ten
times faster than the 100 megabits promised under the NBN. With the NBN still eight years away from completion, taxpayers may be left paying for out-dated technology due to the government's philosophical bent for an out-dated ideology that has demonstrably failed in the past.
Alas, there is an anathema in some media quarters to dig deeper, to put the government's political philosophy and ideology under the microscope. Echoing Conroy on Insiders last Sunday, the ABC's Fran Kelly complained about The Australian's "campaign" against the government, about the "hard line" it has taken. It was "harder than the Fairfax press", she said. It's called keeping the government accountable, Fran. Perhaps other media outlets could try it.
On the same program, the SMH's David Marr lowered his voice in sinister tones, referring to "that other role" of this newspaper: "the heavy lifting that it does on ideological issues". It's uncanny how ideology is wicked as soon as it differs from the orthodoxy on the Left. This is a timely debate about ideas, David. And history has proven that some ideas are better than others.
We have entered a phase in history where governments increasingly intervene in markets because markets are perceived to have failed. But the insulation program reminds us why we moved to market-based economies in the first pace. Centrally planned economies were even more disastrous. Markets are not perfect but they beat hands-down the enormous distortions created by ham-fisted government regulation.
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