“All governments are failures,” Oscar Wilde once proclaimed.

It’s quite true.  They have a great deal of power, limited and infrequent accountability, and can fund any project they like with the taxes they demand from us.   That is hardly an environment that is conducive to efficiency and competence.

A prime example recently was the government guarantee of Mascot Finance.  Mascot was clearly in trouble and had ceased taking deposits, yet Treasury guaranteed the company.  When, to no one’s surprise, it failed just a few weeks later, all we got from our Prime Minister was a “Whoops, we made a mistake there.” In the private sector you’d almost certainly get the sack for such an error, and losses on that scale would bankrupt many businesses.

But in government it’s “easy come, easy go.” When you don’t have to earn your money, you tend to spend it more loosely and with less accountability. While the private sector isn’t perfect, they generally make fewer errors than governments – business owners’ houses, livelihoods and retirement savings are on the line.

For these reasons, it’s important to restrict the role of government. Almost everyone would agree we need law and order and so having a government administer a police force and judiciary seems like the safest way to handle these issues. To restrain crime of every sort is the fundamental role of government.

Beyond this, the important thing for a society to do is to restrict government to those activities that the private sector cannot reasonably manage. This seems to make for the best and most prosperous society.

My wife grew up in communist Hungary and her experience is that when the government runs everything, it makes people poorer – not richer. People who are poor and desperate will do anything to improve their lot, and this accounts for the large “black economy” in Communist regimes.

Indeed, long before communism arrived in its modern form, Thomas Jefferson identified its hideous reality. “Government big enough to supply everything you need is big enough to take everything you have,” he said.

The US was once the polar opposite of communism – it was the land of opportunity, where everyone had the chance to better themselves and to control their own destiny.  It’s on that basis they became the most prosperous country on earth.

Their current woes are good evidence that utopia is hard to achieve.  It seems that the US government facilitated corporate crime rather than restrained it – but I’d still rather live in the US than North Korea.

Politicians are also terrible egotists.  Once elected, politicians seem to think they should take the lead on everything – particularly economic prosperity.  History indicates that great business people, inventors and engineers have driven economies – not governments.  Politicians should perform their necessary underpinning role and stay well out of the way.

Some choice examples of government failure exist in our own region.  Splash Planet was touted as an exciting commercial venture, set to be a cornerstone of Hawke’s Bay tourism.  Of course, reports also forecast it would quickly become profitable. Sadly Splash Planet has continued to be a loss-making venture that has delivered well short of its potential.

Similarly, the press recently reported that the Opera House is losing $100,000 a month. Although it is a fine facility, it is clear that it is grossly over-capitalised and cannot generate enough revenue to sustain itself.

These are good examples of how governments fail to keep their feet on the ground, and have far too great a belief in their own commercial competence.  Neither project was a bad idea, just badly managed, with the rate payers continuing to pick up the tab.

Splash Planet is a good example of a venture in which the Council should have sought a private sector partner for at least 50% of the project.  The facility is a commercial venture, a natural monopoly and should be able to be run profitably.  If a business person had their money on the line, greater urgency would have been shown in getting it right. Failing that, Council should have just leased the facility to an operator for $1.  Even that would have been vastly preferable to making ongoing losses.  To do this would have been an admission of incompetence, and so it was never going to happen.

Now we are presented with a $56 million Regional Sports Park, a facility that has grown spectacularly from the original proposal we voted on.  At a time when house prices are falling, jobs are in jeopardy and the Council’s rate income is set to plummet, should we really have such grand ambition?  Is a $12.8M velodrome really a “need” of our community?

There is no doubt that some sports need more investment.  Netball is an excellent example of a sport that lacks facilities.  We should have built new netball courts at Windsor Park over the summer so that they could be ready for the start of the current season.

With all these things, a good question to ask is “How can we get the private sector funding this, rather than ratepayers?”  There are many elderly people who don’t require sporting facilities and don’t really want to pay for them.  Perhaps Council should allow a 30% rates rebate for businesses that make a donation to an approved sports club.  Is not the public in a better position to decide which sports bring value to the community and which do not?  Or does government have to administer all the handouts?

Of course governments don’t like ideas that make them less relevant and empower their citizens.  Government would rather hold the sports clubs in servitude – with their hands held out for funding.  Taken to the extreme they would also like to decide who gets to eat and who does not – perhaps they already do.

It seems human nature is all too willing to become indentured to the state.  If government can acquire “easy money,” then the smart thing to do is try to get your snouts in the trough of that “easy money.”  It is the perfect environment for pompous demagogues to groom citizens that are happy to give up their self respect.

As for our own community, it’s time for back to basics government.  Faced with what looks like an enduring recession, council need to restrict themselves to a simple list of functions they should seek to perform with excellence. If that were the case, I genuinely believe rate decreases would be achievable.

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1 Comment

  1. Aah, Paul, your admiration for the irony of Oscar Wilde is known to me. But Wilde depended upon hyperbole and/or sensationalism to attract attention to his utterances, it seems to me. "All Governments are failures" falls into that grouping, perhaps.

    For example, who would call the WWII Government of Winston Churchill a failure ? Many would call it a spectacular success.

    Nonetheless, it is difficult not to agree with your claim that our national and local government environments are not conducive to efficiency and competence. Anyone promising to rob Peter to pay Paul can expect to get a vote from Paul. And anyone spending some-one else's money quickly acquires an expertise at doing so.

    Likewise, it is easy to agree with you that law and order, the restraint of crime, is the fundamental role of a Government, beyond which we as a society/civilisation should strive "to restrict Government to those activities that the private sector cannot reasonably manage".

    But you prod a hornets' nest here.

    In the first instance, there is the question of what is a crime and what should be a crime ? For almost all of us, the deliberate taking of an innocent human life would be the most basic and reprehensible crime that Governments should act to restrain. But we all know that successive democratic Governments here and abroad have chosen that the deliberate killing of an intra-uterine person shall not be a crime. What use a Government being tasked with restraining crime if it can't be trusted to identify crime in the first place ?!!

    In a second instance, I'd guess that your category of "activities that the private sector cannot reasonably manage" would include national security / defence forces, and activities that no private sector player is likely to touch, e.g., roading, sewerage. In a small population like ours, there become other activities that a Government has to take on which in a larger population could be handled by the private sector. School teacher training, for example, perhaps. Schools themselves, of course, should all be free of Government impositions. But, as you write, "Governments don't like ideas that make them less relevant", especially Labour Governments of university lecturers, school teachers and trade union activists.

    As for the Government's two-year guarantee of certain deposited/invested funds, I see a dilemna here. Although I've not read the fine print (Where does one find it ?), and am informed by only media output, there would seem to be an obvious attraction of bank deposits away to finance companies when finance companies offer higher returns which are guaranteed by the Government for the next two years. Thus a major difficulty for banks attracting deposits, which used to be and should return to being the source of loans. However, what happens at the expiry of the two-year period ?

    Do we find that, on 31/12/2010, all finance company depositors withdraw their funds and hive off to the nearest low-risk bank ? What happens to those finance companies ? Do they go belly up again as a result of a rush on withdrawals, as was the cause of their recent demise ? Or will we find that an irresistible force has met an immovable object ?

    Will it be that the Government will come to realise that its guarantee can never be terminated ? If so, where would lie the longer-term future of bank deposits ?

    With regard, Paul, to your specific opposition to a $12.8m velodrome in Hastings paid for by local body Rates income, one surely would be hard pressed to find a supporter for that proposal outside of a lunatic asylum. But, presumably, there are a few supporters amongst the local councillors. Regrettably, I can't agree that "the Council's Rate income is set to plummet", although, like you I presume, I'd love to see it happen. In such a case, continuation with such a grandiose proposal would give further endorsement to your public comments previously published elsewhere as to the nature of substances entering the ingestive systems of councillors.

    I assume that your expectation of plummetting Rates income is a function of your expectation of diminishing property values. Although Rates are charged out as a proportion of property values, when property values diminish the proportion simply rises to accommodate the Council's budget.

    Your dissatisfaction with sports funding is akin to something dear to my heart, and very much indicative of how wrong Governments/politicians can get things.

    When Government (national or local) funding of sport first raised its head quite some years ago, the idea was for public sports facilities. The idea was for public money to be spent of facilities that would allow/encourage Joe Bloggs to get more exercise and, thus, be a little healthier. So, public tennis courts, etc.

    Very quickly, however, a conspiracy of national sporting bodies and it'll-be-good-for-my-image politicians derailed that idea and replaced it with one that would see our elite athletes/sportsmen conquer the world and reflect glory on our Government. Meanwhile, Joe Bloggs got fatter and more unhealthy sitting on his sofa watching those elite athletes under-performing on the world stage.

    SPARC is part of our problem, not any part of the solution.

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