Sunday, February 12, 2012

the rich is gettin’ richer quicker

The other day in The Age there was a reference to something called the Gini Co-efficient. Off goes I to the OECD website to see how this works, only to feel my eyes glazing over and my brain going into a flap when I found the answer.

On moves I quickly – for health reasons – to Plan B, which was to look for something written in English rather than Numberish. [Perhaps the word “numb” is derived from the same root as the word “number”?]

Anyway, here’s the story as at 2011:

In OECD countries today, the average income of the richest 10% of the population is about nine times that of the poorest 10% – a ratio of 9 to 1. However, the ratio varies widely from one country to another.

It … reaches 10 to 1 in Italy, Japan, Korea, and the United Kingdom; around 14 to 1 in Israel, Turkey, and the United States; and 27 to 1 in Mexico and Chile.

So now it’s official: In dollar terms I’m dancing the two steps forward three steps backward uh-oh.

If we don’t think the gap is morally wrong, we might at least think it doesn’t contribute much to social cohesion.

I’ve always been impressed by the idea of personal responsibility. There’s no question that I’ve made some dumb choices over the years, and failed to make the most of some of the opportunities given to me. Gosh, I’ve even failed to make the most of opportunities to create opportunities.

On the other hand, some have more opportunities to create opportunities than others.


During the great era of privatisation in Australia, Jeff Kennett was premier of Victoria. Recently, while rabbiting on about the government propping up the car industry, he said socialism

“is defined as "a political system which advocates public ownership of industries, resources and transport".

I would define it as the irresponsible use and waste of public monies in the absence of good policy with a single purpose: to buy political support.”

It’s a pity he has tried to pass off the crime of buying votes as socialism. Every democratic country has an economy that is mixed; that is part socialist and part free market:
  • Those holding socialism up as a bogeyman, more often than not, are usually looking for an excuse to avoid doing something about the gap between rich and poor. [The corollary is that those who hold free markets up as ideal are usually in the top 10% of rich folks].
  • Public ownership of industries, resources and transport is not such a great evil either.

There is something rather shortsighted about selling our agricultural land to overseas interests. Why aren’t we holding on to the means to feed ourselves? At the very least we should be just leasing the land, rather than flogging it off.

There is something rather shortsighted about handing over control of our public transport systems to overseas operators, even if just on long term contracts.

And as our electricity and gas bills are proving, the great god free enterprise has not necessarily done a better job of providing essential services than the public service used to do.

Large companies can be as bureaucratic and inefficient as any public service arm. Some private employees can get away with being as slack or demotivated as the worst public servants, while the majority in either sector are more productive and motivated when they are treated with respect.

When I look at joint ventures between governments and private enterprise [e.g. Victoria’s desalination plant] I’m not seeing proof that the public service is as great an evil as it has been painted.

The public service is not inherently evil. With the right public servants, we get the benefit of experience, as well as stability in tender processes and contract administration. [Think insulation batts.]

The only thing wrong with the public service is that it can be abused by governments - on either side of politics - as a job creation tool. It's governments that do the abusing, not the public service, just as it's governments that decide which industries or companies to prop up with public money.

Free market theory holds that if a company goes broke it’s either inefficient or it’s making something nobody wants. This sort of thinking has no place in the area of essential services.

Essential services are, by definition, the services we rely on to keep our world [and economy] running. When the electricity supply in any city in the world comes to a halt, it’s a disaster.

Everybody wants electricity, and while we have government approved “watchdogs” to protect citizen consumers, these private operators will not go broke if they are inefficient, they will simply charge more.

As every person who does unpaid work around the home knows, [whether doing the laundry or fixing their own washing machine], price is not the only measure of what can benefit people.

Just as there is no such thing as a free lunch, there is no such thing as a perfectly free market. There is a role for governments to play in the market place,
  • making it as free as possible [so there are incentives to succeed, reward for risk etc]
  • making it accountable to “the people” [just because a free market exists for heroin does not mean it makes the world a better place]

What we are lacking here is not the great benefits of private enterprise so much as the accountability side of the equation.


The car industry is a massive creator of jobs and, even if the companies are owned by overseas interests, the job losses involved if they leave the country would be incalculable.

Successive governments on both sides of politics have, from time to time, propped up industries to keep people in jobs. The only thing wrong with this is we don’t always get a share of the profits: Businesses [Australian owned or otherwise] for some reason can get great injections of money, with no obligation to repay anything in the event of a profit. They then sell off a hunk of assets and give nothing back to the government, because the assets are not secured in any way.

This is neither free enterprise nor socialism, it’s just stupid government.


Like many industries, the car industry in Australia is suffering because of the high value of the Australian dollar.

The high value of the Australian dollar is largely due to a mining boom.

The stuff in the ground being mined belongs to all Australians. This is not socialism, this has been law in English style colonies/countries for a thousand years. That’s why mining companies have to pay royalties to the government.

Taxes have always been used, not just to raise revenue, but to influence behaviour. If we want to encourage people to take out private health insurance, we subsidise it. If we want to discourage something damaging, we not only tax it but manipulate the tax involved to get the amount of activity just so.

The super-profit mining tax was not just about revenue raising, or even envy or resentment of private investor success. If it’s damaging the rest of the economy, the level of mining activity should be manipulated and taxes are the way to do it.

One party watered down its proposed super profit mining tax, the other objected to the tax altogether.
The failure to control an industry so damaging to the rest of us is, in part, based on the notion that the industry is creating jobs.

Is it creating more jobs than it is destroying?

Every country needs a quota of relatively unskilled jobs, but how many of these mining jobs are unskilled?

How many mining jobs will disappear as the industry becomes increasingly automated? [Think of trains which already run hundreds of miles without so much as a driver.]

Why are we eagerly selling so much ore and other stuff we’ve dug up without even processing some of it first? 

No resources are infinite, and every other industry has to adapt to cheap labour in overseas countries. There seems little difference between selling raw unprocessed materials [and letting people overseas do the value-adding], and sending many other jobs [such as telephone room operations] offshore.


Jeff Kennett has this all wrong, and what is going wrong and causing the gap between rich and poor to grow is not socialism – it’s actually taking ownership and control and benefits from the people and giving preference to private enterprise and large corporations and even filthy rich individuals.

This has been done before. It was done not quite a hundred years ago by three blokes who thought private enterprise was everything. Their names were Hitler, Mussolini and Franco.

Way to go, Jeff.



  1. VERY happy to see this post. we are of one mind! I plan to post on this also. Up with US!

    Warm Aloha from Waikiki
    Comfort Spiral

    > < } } ( ° >

    1. Hi Cloudia,
      I've noted your interest in the Occupy Movement and, yes, we are of one mind :)

  2. You'd think the gap btw rich/poor wouldn't actually grow under a Labor Government either, would you?

    And I can't believe more people aren't aware that Centrelink is really an unpopular policy-laundering organisation ...

    I'm slowly catching up on my reading after being off the air for awhile! Thanx once again for a well-written, balanced and thought provoking post. I take my hat off to you!

    1. Hi Red, thanks for your ongoing support - it makes your very "agreeable" in my book.
      As for Centrelink... this Government seems to bungle just about everything they touch but in this area they seem to have made social security more inaccessible than ever. Yes, one would have to be very hungry indeed to subject oneself to the process.
      As for being off the air... hope I don't have to pick up my swag and waltz matilda anytime soon, I would much rather have money to go on a bakery crawl.

    2. All I know about Centrelink is they've helped me attain a decent standard of living by boosting my small income.
      I wish I knew more about and understood politics as you all seem to, but to me it might as well be Klingon for all the sense I make of it.

    3. Hi River, I've received some very helpful advice from the people at Centrelink over the years, which is probably one of the main reasons it's hard to like the new system of having to talk to someone faceless over the phone.
      It's kind of you to give my biased complaints a polite title like "understanding".

  3. There will always be a gap between the rich and the poor its the way of the world :-).

  4. Oh Windsmoke, it might seem that way but I certainly hope you are wrong :)

  5. You have stimulated me to start writing a post about our electricity supply. I pretty well agree with everything you have said. There is no inherent reason why a government owned enterprise cannot be as efficient, if not more so because they can borrow money more cheaply the PE, than private enterprise. I've just realised private enterprise is one of those pair of words. Enterprise sounds good and positive. A service does not.

    1. Hi Andrew, I've never thought about the words private and enterprise in that way before. It's a great point. Also never gave much thought to the issue of governments borrowing money - which is another good point.

  6. An in depth discussion and an interesting one. I don't think we should be selling off the farm to overseas countries. I agree that essential services should be owned by the government. The aim should be to provide good service not necessarily making a profit especially in the case of public transport.

  7. Hi Diane, Public Transport should be just that; Public. It's another area where those who run the business need not be too concerned about attracting or keeping customers.
    Our state governments are failing to develop or maintain infrastructure to an appropriate level, but seem to be passing responsibility for problems to operators rather than being directly accountable to the public. Certainly, long term contracts mean that in the event of failure there is little possibility of public servants stepping in to take any positive action.

  8. Not being Australian, I'm not too familiar with this stuff but it doesn't sound much different from the U.S. I'd be happy if we simply had more forms of public transportation outside of the large cities.
    Also, I don't think the enormous gap between those who have extreme wealth and those who have none is the way of the world. I think it is presently a temporary thing and that those in the top 10% are digging a big hole for themselves and those of us without will be only too happy to bury them in all their greed. One can hope anyway. :)
    Nice post FruitCake.

  9. Hi Rubye,
    I think it is much the same thing anywhere in the west. The gap in the U.S. is certainly way too big. I suspect both your democrats and republicans are separated only by how much they claim to distrust socialism. And, to many Australians, people like Michele Bachmann who have a real problem keeping god out of the equation just make the whole business more emotional and hard to argue with in any rational way.
    But yes, we hope it is just part of a cycle. It would be ironic [and pleasing] if the prediction in Psalm 7:15 came to pass - "He has dug a hole and has fallen into the pit which he made".

  10. I've obfiously explained myself badly. I have nothing but respect for Centrelink workers, it's the fact of the organisation itself I take issue with. Whenever there's a new unpopular government penny pinching 'initiative', Centrelink gets to implement it, and the news stories are all about 'evil' Centrelink. NOT the 'evil' government policy. For some reason, the general public seems to think Centrelink staff make up the rules themselves when they're only implementing government policy. That's all I meant!!

  11. Hi Again Red, I think you've explained yourself well and that neither of us made negative comments about the Centrelink people themselves - it is a policy laundering organisation as you so rightly put it.

    When the govt of the day does something they believe will win votes, they announce it loudly and put up signs saying "Cwlth funded Scout Hall Project 5 gazillion $... [less an increase in national debt of 6 billion for this sign]... whereas delivery of the "taxing" policies is left to the few poor sods left in the public service.

    All of which leads to another topic which would be leadership of the nation as opposed to leadership of the caucus/cabinet, but I'll just make do here with a comment that Tony Abbott is the best thing to happen to Labor for many a long year.