Ok, this isn’t so much about Scott Morrison as the whole problem of using an analogy to explain a complex economic concept. Sometimes using an analogy is as ridiculous as Cory Bernardi and his Hottest 100 kerfuffle. For those of you who haven’t caught up. Bernardi has released his own list because Triple J decided not release theirs on Australia Day. Is it just me, or is there something absurd about a man protesting about Triple J’s lack of patriotism for not sticking to Australia Day by releasing his own… several days before Australia Day? Should we all start complaining to Bernardi’s office about his disrespect for January 26th and how Australia Day is the only appropriate day for a list of songs?
As I’ve often pointed out, Liberal governments like to use analogies to discredit Labor. Whenever Labor runs up debt, they compare it to putting something on the credit card. Well, show me a credit card with a three percent interest rate and I’ll happily put my entire mortgage on the credit card. The Liberals also like to flip between comparing running the government to either a business or a household.
The trouble with the constant flip-flopping is that a government is neither, but has things where both are an appropriate comparison. To some extent, governments should model best business practice in that they should try to be efficient. However, they should also model a household in that they should look after the people in the household. When you move from one analogy to another, it’s easier to confuse the public.
Let me make this clearer by pretending to be Scott Morrison explaining cuts in the Budget to Health and Education by pursuing the household budget analogy to its logical conclusion:
“We’ve made cuts to Health and Education because you know what happens when you run a household which fails to live within its means, the people in it go broke. When grandma’s health costs start to cost too much, you tell her that she just needs to decide whether she cuts down on her pain medication or whether she really needs that operation on her hip. After all, it’s not like she’s going dancing anytime soon. As for junior, you find a way to pay for his next year at school by having an international student board with you. Unfortunately, because the international student needs their own room, Junior will need to sleep in the toolshed. To make this feasible, you offer to lend your son the money to buy a new bed to put in the toolshed…”
See, the household budget sort of sounds ridiculous when you imagine a real household.
Anyway, enough about the Liberals and how analogies are a really silly way to demonstrate something. I’ve got this great analogy I’m going to explain what’s wrong with economics as practised by the Milton Friedmans of this world. The trouble with the adherents of this ideology is that they work on the theory that the market will solve everything… eventually. However, one basic flaw in this idea is that sometimes a shonky operator has made a few million before he needs to shut down and declare his company bankrupt. The “market will find a solution” theorists seem to presume that everyone will want to stay in business.
But moving on.
Let’s imagine a very, very small country. Let’s make its population exactly one million people. Let’s give it a name…
Mm, Turnbullia? Whatever, it’s not important. Just imagine a country and imagine that it’s governed by a group of politicians who make all the laws, issue the currency and call each other names whenever they come together in the building which they call, “Big House For Talking”… Mm, no wonder we appropriated the word “Parliament” from the French.
Now, the capital of Turnbullia is Bigcitiville. About half the population live and work in Bigcitiville. It’s a modern city with big buildings, cars and trains. The rest of the population are scattered around in towns at distances ranging from ten to forty kilometres away. The people who live in these places don’t have cars because of one important reason: The only roads they have are small dirt tracks, and totally unsuitable for modern transport. Consequently, there is no easy access to Bigcitiville, so people from the outlying towns almost never go to the capital because, not only is it difficult to get to, but they spend most of their time eking out a subsistence living because there are no jobs outside Bigcitiville.
One day, Milton, one of the governors had an idea. He suggested that building roads between Bigcitiville and the outlying towns would be a great idea.
“Why?” the other governors wanted to know.
“Well,” Milton told them excitedly, “then the people in the outlying districts could come here and work or get educated and…”
“But how would they pay for it?” one of the other governors demanded to know.
“That’s right,” chimed in another. “They don’t earn enough to pay tax, so how will they pay for the roads?”
“Well,” explained Milton, “I thought we could build the roads and then when they came here and started working, they’d start paying tax. But not only that, we could send teachers and doctors to the outlying towns and then, when they were better educated, they’d start creating jobs and we’d get even more tax in the long run.”
“But how would we pay for it in the near future? We’d have to put up taxes.” said one governor.
“Yes, I see,” said Milton. “That would be a problem because we need to think of the present moment and what happens in the future shouldn’t concern us at all. I can see that it’s so much better to leave them uneducated and poor. If they really want a road, then they should pay for it themselves. After all, nobody in Bigcitiville wants their taxes to help anyone else.”
“You nearly forgot one of the three maxims of Turnbulllia:’
“I know, I know,” said Milton. He recited them quickly: “Nobody matters but me. Always blame somebody else. Wherever you go, take a selfie.”
Of course, some of you may wonder why, if the government issues its own currency, it can’t just build the roads and work on the theory that, as the whole country will be more productive, then there isn’t really an inflation risk. But you’re exactly the sort of troublemakers who ask questions when the governors hold a press conference, and the simple answer is that they’re the adults and they know what they’re doing and it’s not always easy to explain in ways in which you’d understand so if you ask the question again, we’ll just refer you the three maxims of Turnbullia and… “Oh look, there’s something moving in the bushes and it’s probably dangerous so quick everybody run and hide!”
Ok, there may be a few holes in the story. Because after all, it’s just a work of fiction and you couldn’t’ expect a real country to be run like that.