From: ajw@squid.mel.dit.CSIRO.AU (Andrew Waugh)
Subject: Re: Will Victorians vote stupid yet again...?
Organization: CSIRO, Division of Information Technology, Melbourne
Distribution: aus
Date: Mon, 5 Oct 92 06:54:43 GMT

In article <miw.718260312@cc.uq.oz.au> miw@cc.uq.oz.au (Mark I. Williams) writes:
>ajw@squid.mel.dit.CSIRO.AU (Andrew Waugh) writes:
>
>>Victorian governments have always financed assets from borrowings.
>Yes, but public dept as a percentage of the economy is incredibly high
>in Victoria.

I quite deliberately avoided arguing about this point as it confuses the
issue. I was attempting to point out to Dave Suter that states will always
have public debt and that there are very good historical and political
reasons for this. Once this point is agreed with, we could then have started
to debate the proper level of the debt, how it should be measured and
what it was to be compared with.

>>(Incidentally, asset financing is exactly the same in all other states
>>of Australia.)
>Just not true. Have a look at the levels of public debt in Queensland.
>they are *much* lower than in Victoria. There are *lots* of other ways
>to finance public assets. Examples: state lotteries, contracting them
>out and allowing tolls to be levied (i.e. convert public debt into
>private debt), and even (gasp) taxes.

Yes, there are other ways of financing public assets, but what is the main
means of financing public assets - even in Queensland?

>>The 'rational' for financing assets from borrowings is that the assets
>>benefit future generations; it is only fair that these future
>>generations help pay for the assets. 
>
>The 'rationale' is that borring money for public works increases the
>money supply and provides jobs, thus raising demand and promoting
>growth.

I was taking a rather more historical view rather than just looking at it
post Keynes. In any case Keynes was only talking about public sector
borrowing during a recession or depression.

>>A final problem is that a large amount of the assets are essentially
>>unsaleable. Who do you sell the road system to? Consequently, the
>>assets that are sold have to serve twice. They have to cover their
>>own cost and the cost of the assets which cannot be sold. This leads
>>to the selling of the `plums' -- assets which are readily saleable --
>>and, potentially, leaves the State with a core of unsaleable assets
>>which generate little or no revenue to cover their debt.
>
>Which is exactly what they should be doing! If the asset is readily
>salable, it should be sold because the marketplace can make more
>efficient use of it. If it can't be sold, then it isn't an asset. It's a
>*service*, which is what governments should be providing. 

Two statements based on ideology. Whether or not you agree with them depends
on your ideology.

>That's what got Victoria in so much trouble in the first place. The Cain
>government thought it would go into business in a big way, in
>competition with the private sector in many cases.

The causes of the depression in Victoria are many and varied; the economic
competence (or lack of it :-) of the Cain government was only one factor. We
would certainly have not had the VEDC disaster under a Liberal government,
but would we have had Tricontinental? Pyramid?

>Of course the public
>sector doesn't have to toe the line in the way the private sector does,
>and *of course* it going to be mismanaged. 
>
>Of course you can get badly managed private-sector organisations as
>well. Any organisation with a monopoly/near monopoly and which is
>sheltered from proper scrutiny will have the same characteristics.

If Westpac, Farrow, Estate Mortgages, Bond, (...) were monopolies or near
monopolies sheltered from proper scrutiny, then I guess just about all
companies in Australia in the same boat and all must be badly managed!

andrew waugh
Newsgroups: aus.politics