David Mortimer was asked last year to do a review of government business programs.
These have been less charitably referred to as industry welfare — that is government help for those who cannot stand on their own two feet.
When Mortimer presented his report this week it generated a fair amount of debate and media sparring about differences between Cabinet members about the issues.
The most noticeable difference was about setting growth targets. Mortimer wants targets for per-capita economic growth. He is a businessman. Businesspeople like targets. It is a caricature of businesspeople that they stand in boardrooms with graphs showing profit increases. These are nicely measurable and if the profit target is not met, there is blood on the boardroom floor.
Treasurer Peter Costello and Industry Minister John Moore, on the other hand, reject this element of the Mortimer report. They do not like the sight of blood, particularly their own.
Then there was the difference between Costello and Moore. Costello is more a proponent of self-help than many of his colleagues. He has a greater disdain for welfare whether personal or business. Perhaps it is his Baptist upbringing. Moore, on theother hand, is more a proponent of helping business than many of his colleagues. Perhaps it is his background in the Queensland bush which requires more co-operation to survive.
However, Moore shied away from any suggestion that he was in the game of “”picking winners”. And rightly so because that was been condemned when done by big spending sate Labor Governments in the 1980s because it carried the odour of favouritism for business mates and the opprobrium of blame if the winners turned out to be losers.
None the less, Moore likes the idea of government financial support for industry whereas Costello prefers the idea of getting all the economic settings right so that industry will do well of its own accord.
It is a fundamental difference. Both Ministers tried to play it down by saying “”this is a good report”, but in doing so they must have been referring to different parts of it.
In all of this talk of industry welfare and growth targets, the great strength of the Mortimer report has been side-lined. The worthwhile part of the report is in identifying what is wrong with present industry programs and how they could be done better. In other words, if Mortimer had stuck more rigidly to his brief he would have had fuller ministerial backing.
But that was probably an impossible task. Mortimer was bound to stray from reviewing (ital) existing programs (end ital) that help business to suggesting general measures to help industry. That meant straying into things like tax, industrial relations, macro-economic settings, infrastructure and even population growth (where he rightly asserted that economic growth figures have to be discounted by population growth).
And it is in the general measures that you get the political differences. Some would argue that if you get things like tax, industrial relations, infrastructure and economic settings right, then there is no need for grants to industry. Worse, grants to particular industries would be a distortion in the allocation of resources and make the country worse off.
This view says that if the ground is made secure industry can stand on its own feet and will not need welfare. If you have a good diet and exercise, you can chuck the vitamin tablets away.
The opposing view is that, however good the settings, government help to targeted industries can be very effective. In particular, seeding money to new industries which would never get off the ground is worthwhile. It creates investment and jobs.
Recently, people holding these views have used the tiger economies of south-east Asia as examples. More comprehensive examples of government seeding of industry — such as the Five Year Plans of the Soviet Union and China’s Great Leap Forward — are conveniently ignored.
The comparison with the tiger economies should be taken with a grain of salt. Typically these economies are coming off a low base, so their growth rates are quite high. They present good investment opportunities. But this is not because government help is high or government settings are excellent, but because the people of most of these countries have low standards of living that can be exploited.
We need to draw a distinction between economies that deliver good investment opportunities and those that deliver high standards of living. And standard of living must take into account health, education, human rights, clean environment and so on, as well a mere money.
The other point about industry welfare is that, like personal welfare, it ultimately goes to individuals. At present the Government spends $3.2 billion a year on industry welfare.
Mortimer recommended it be substantially increased ($20 billion over five years). But at least he had the good sense to recommend that where business programs benefit identifiable individual businesses the principle of user pays should apply where practicable.
He also had the good sense to point out the failings of present programs. Here are too many of them delivered by too many agencies; they are complex; the policy goals behind them are obscure; information gathering is complex and intrusive; and there is no guarantee how long a program might last.
It seems to me that before we dish out any more industry welfare we should straighten out what we have. On that Mortimer is sound.
And we should learn the lesson of personal welfare. The more available it becomes the more people rely on it instead of standing on their own feet. In 1996, 31.7 per cent are primarily dependent on welfare for their income; in 1978 it was 16.6 per cent. Do we want industry to be so dependent?
Perhaps if we had got the settings right we would not have got into this trap with personal welfare, and there would be no need to follow suit with industry welfare.
If you collect large amounts of money and funnel it through government back out to the people or industry it is bound to be costly and inefficient. You may justify it morally to a limited extent for individuals, but it seems to run counter to everything industry should be about.