Ideas@TheCentre brings you ammunition for conversations around the table. 3 short articles from CIS researchers emailed every Friday on the issues of the week.
The New South Wales government’s plans to spend $2 billion plus to replace two stadiums in Sydney reminded me of the oft-quoted comment on uncontrolled government spending attributed to a 1960s era United States senator: “A billion here, a billion there, and pretty soon you’re talking real money.”
In the NSW of 2017, his sarcasm is relevant to projects such as Sydney’s George Street tramline as well as the Sydney Football Stadium and the Olympic Stadium. Sydney needs better public transport and world-class stadiums, but it is far from clear that these projects are the best ways of achieving them.
The stadiums episode is an example of why governments flush with funds cannot be trusted to use them wisely. Hubris sets in and money gets wasted. As confirmed by the budget update released yesterday, the NSW government is flush with tax revenue from the real estate boom and with many billions in privatisation proceeds.
The experience was similar at the federal level as the resources boom boosted tax revenue in the 2000s. Recurrent spending was increased as if revenue had reached a permanently higher plateau, which was subsequently shown not to be the case. The new CIS paper From Reform to Retreat: 30 years of Australian fiscal policy — released earlier this week — drew the general lesson that temporary revenue windfalls can sap a country’s fiscal strength in the longer term if they are used in ways that lock in fiscal costs.
At least the expenditure on stadiums is a capital outlay and therefore has a finite life.
The stadium episode also illustrates the public’s appetite for government spending. While the stadiums have been widely criticised, to my knowledge all of the critics have suggested spending the money on something else, rather than just not spending it at all and therefore having lower NSW government debt in the future than is currently projected.
As highlighted in From Reform to Retreat, the forces for higher government spending have become well entrenched in our democratic systems while the forces in favour of lower taxation and borrowing are more disparate.
In an interview with Paul Kelly to mark the 40th anniversary of CIS last year, founder and (now outgoing) executive director Greg Lindsay reflected on past successes and future challenges, before noting:
What occupies my thinking now is that there are limits to what governments can do. We’ve lived through a whole generation of government overreach, of government trying to do things that it is not suited to doing and doing things that it shouldn’t be doing. We have not won that argument yet.
In the new Summer issue of Policy, Mont Pelerin Society president Peter Boettke takes up this argument in the wake of the populist revolt against establishment elites that Brexit and Trump signalled.
He begins by warning that “being anti-establishment should never be enough to bring intellectual joy to a true liberal.” While the populist critique of expert rule is an area of overlap, he notes that populists do not want to limit government — as true liberals do — but merely want to put different people in power.
Yet, paradoxically, the very growth of government has ‘pushed politics beyond the limits of agreement in the democratic West’, explaining both ‘political dysfunction and populist disillusionment’– and echoing Wolfgang Kasper’s Autumn 2017 warning that we are locked into an ossified Olsonian trajectory of growing citizen disenfranchisement.
The social ills that are faced across much of the world can be traced to this growth of government, which — as Boettke puts it — leads to the “erosion of a contract-based society and to the rise of a connection-based society, entangling government, business and society.”
He cites policies that protect privilege instead of promoting competition, and banks privatising profits while socialising their losses — as per the bailouts during the 2008 Global Financial Crisis that are now increasingly recognised as a slow-burning tipping point in the recent eruption of populist anger.
True liberals, he urges, need to convince the establishment elites and populists that the issue is not just ‘erring entrepreneurs’ but ‘bumbling bureaucrats’. The main difference is that in government nothing succeeds like failure. So we just get more of the same — government grows because it fails and fails because it grows.
Aarti Sharad Seksaria
With the Chinese dragon gaining a stronger foothold in the Asia-Pacific region, we’ve seen a revival of the ‘Quad’ — the Quadrilateral Security Dialogue of Australia, Japan, India and United States.
The Quad’s aim (to secure their interests in this region of geopolitical significance) means China’s assertiveness will now be cautioned by four democracies that hold immense value — political and economic — to Beijing.
The inverse holds true too. The Quad can be viewed from four sides that highlight the differing agendas in this security club.
For India, Xi’s Belt and Road Initiative brings its two historical rivals — China and Pakistan — together, and includes massive infrastructural projects in the Indian Ocean. Indian PM Narendra Modi is not naïve. He realises China may soon be able to contain India from all sides and undermine its national security and regional interests.
Past alleged injustices at the hands of the Japanese make Japan (possibly) the country China would least want to ally with. India and Japan’s territorial skirmishes with China also mean engaging in a security dialogue against their mutual adversary is a very strategic bulwark.
For the US, China’s increasing influence in the Asia-Pacific is a challenge to its interests and hegemony in the region. The Quad allows Washington to collaborate with three major powers of this region and serves as a unified front to help contain China — in a sense, the US’s ‘Asian NATO’.
Australia predicts possible ‘frictions’ with a rising China and emphasises the practice of a rules-based system in the South China Sea. But while Australia’s foreign policy defense paper reaffirms its commitment to the Quad, we remain the least strident player in the club — largely due to trade considerations.
The Quad’s four sides are essentially India’s ‘Act East’ policy, US’s rebalancing strategy, Japan’s ‘Proactive Contribution to Peace’ — and Australia’s careful approach to a rising superpower that is also our largest trading partner.
Aarti Sharad Seksaria is a masters student in international relations at ANU, and an intern at the Centre for Independent Studies