According to Labor guru Graham Richardson “… handing out a few dollars to help [parents with school children] in hard times is exactly what governments should do.” (The Australian, May 11, 2012.)
Most Australians would, I suppose, instinctively agree, at least until they thought about the consequences. And what are these consequences? Gradually, step by step, for families to become more and more dependent upon the state for income, irrespective to the degree to which heads of households are participants in the workforce. An electorate-wide class of such dependents upon the democratic state is, ultimately, a threat to its survival.
So, despite what he says in the rest of his article, Graham Richardson is advocating policies which would spread the European disease to Australia.
Australia seems a good way from the European crisis point as things presently stand, but not so far as we might be tempted to think.
As Joe Hockey, the Opposition Shadow Treasurer, pointed out in his April 17 address to the London Institute of Economic Affairs on “The End of the Age of Entitlement”, France spends 30% of its GDP on public social expenditure while Australia spends only 16%.
From one perspective, this looks like a big gap. But from another, you could say that we have just passed the half-way mark on the road to a European crisis. What’s more, we might be even closer to catching the Anglo-Saxon disease than to being infected by the European one, when you consider that the Sick Men of Anglo-Saxonia, the USA and the UK, respectively consume 20% and 23% of their GDP on state-provided social benefits.
Unfortunately, we have all been influenced, if not captured, by the entitlement mentality and the Budget handed down last week, will serve to encourage, with its extra $5 billion in welfare payments, an entrenched pathology rather than to stimulate a return to health.
(By the way, scour though I might the post budget press, I could not find a single journalist or commentator who did not believe that the budget was, at least in part, intended as a vote buying exercise.)
In his speech Hockey remarked that it was “ironic that the entitlement system seems to be most … prevalent in some of the most democratic societies.”
“As we have already witnessed, it is not popular to take entitlements away from millions of voters in countries with frequent elections.
“ … Most undemocratic nations are simply unable to afford the largesse of universal entitlement systems.”
I wonder if “ironic” is the right word. Perhaps “predictable” is nearer the mark. In democracies, the temptation to which politicians almost invariably yield is to raid the public purse to buy votes. And, the voters, though they might declaim in clubs and bars, and around dinner tables, against the wickedness of the practice - “politics is a rotten business!” – privately they expect to be bribed.
Not so long ago I witnessed Ukrainian and Russian holidaymakers casually bribing staff on duty at a Black Sea holiday park in order to gain access to the park’s facilities an hour or two before the “free entry” time of 5.00pm.
Now this kind of practice, we are told, is a very wicked thing and should be stamped out. In the western world we strive mightily to do so, especially in higher order transactions. For example, there is an OECD international anti-bribery convention against bribing public officials in international trade deals. And there is a worthy global NGO in the shape of Transparency International devoted to combating bribery and corruption in political and commercial relations over the face of the whole world. TI even maintains a colour-coded index according to which countries are said to be clean or corrupt.
Most of the happy holiday makers in that Crimean sea side town would, I guess, have been indifferent to, or contemptuous of, my objections to dropping a few grivna into the hands of poorly paid resort staff. In fact, my charming hostess managed to combine both reactions in a single withering look. Prudence dictated that I let the matter drop. To have pointed out that her beloved country rated 2.3 - worse even than Russia! - on the dirty red end of the TI Index, would have invited a reaction too severe to contemplate.
These lamentable ratings suggest levels of corruption foreign to ethically top draw countries like our own and to those like us that cluster at the gold end of the TI Index:
United Kingdom: 7.8
United States of America: 7.1
Preen. Preen. Preen.
It’s true. In our noble nations, bribery is a shocking thing, except that we practice it on our electorates regularly; and they rarely protest, except when some high minded reformer proposes clawing back the bribes they have taken.
We would expect this, naturally, in a fairly rotten country like Greece (3.4 on the TI Index) where every man and his dog is on the take - if you can believe what Michael Lewis wrote in his stunning book Boomerang: the meltdown tour. We witnessed exactly this kind of reaction at the May 6 elections for the Greek parliament, when the mainstream centre-right and centre-left parties were obliterated and the extremes of both the left and the right were empowered.
It is not, however, only among peoples sunk in peculation where voters exhibit hostility to the withdrawal of welfare state benefits. Proud France is tarred with the same brush. A goldish sort of country on the TI vice-and-virtue scale, France, under the leadership of Nicolas Sarkozy, had been working closely with Germany to stretch Greece upon the rack of financial rectitude. On the very same day that Greek voters rejected the EU’s Germanic disciplines, the French chose a new President, the Socialist candidate, Francois Hollande. He had campaigned on a policy of pulling back from financial reform and specifically advocated, for example, reducing the official retirement age from 62 to 60 years of age.
It is not hard to see why. In the first round of the presidential elections held on April 22, one in three French voters supported parties on the far left and far right who were opposed to the EU, to the Euro, and to reform of the French welfare state, especially of its pension system. The good people of France are just like the good pigs of France down on the lavishly subsidized good French farm: once they get their snouts into the trough, there is no getting them out.
Let’s not, however, feel superior about this. There is a little piggy in us all; and politicians should never, ever pander to our concupiscence in the matter of subsidies from the public purse. They do, however, and this could lead to the death of democracy in welfare states.
Crisis of democracy
There is something more, however, than simple bribery at work here. It’s a “constitutional” flaw in democracy itself. The problem with democracy is that the people have the power to vote themselves a subsidy from the public revenues. And what people have the power to do, they will (invariably) do. The political classes, moreover, to get a purchase on power, will promise to act as the people’s agent. Once this transaction has been done, reversing it is wellnigh impossible. Since the payments are sanctioned by the “Will of the People”, they belong to the people as of right. To withdraw this “right”, constitutes a counter-revolutionary act: a breach of faith with the people in whose “will” political legitimacy has its source.
In countries where this “entitlement mentality” is as deeply embedded as it is in Europe, the attempt to bring order to public finances could create political chaos of a kind sufficient to destroy liberal democracies and to replace them with despotisms of either the right or the left. We are living upon the brink of such events.
So, no, I disagree profoundly with Richardson’s insouciant approach to political philosophy:
“… handing out a few dollars to help in hard times is exactly what governments should do.”
No, it should not!
The normal and proper – as opposed to the emergency – function of government should be to empower the people, as far as possible, to care for themselves in hard times.
Joe Hockey’s address to the London Institute of Economic Affairs essays in a practical, rather than philosophical, way the statesman’s alternative to Richardsonian pragmatism.
When he first gave the address, many people thought, as did I, that Hockey had not been wise in his timing.
But when is it ever wise to tell the truth?
*Gary Scarrabelotti is Managing Director of the Canberra-based consulting firm Aequum: Political & Business Strategies.