On that subject of the insulation scheme, we have refrained from saying on a word on it out of respect of the many people who have lost their homes due, apparently, to faulty installation of the insulation. And of course, there is the far more serious and tragic fact that four young electricians died installing insulation in the government-generated boom.
Most government programs are laden with fraud and waste and incompetence. But most are not generally lethal, at least not directly. You could argue the Welfare State has been killing hope and real economic change for years.
But it is truly stunning that a $2.5 billion program designed to put insulation in people’s homes (a dubious program to begin with) actually killed four young Australians…and no one has had the courage to link the bad policy with the tragic result.
Think about that again – the death of four young people is directly linked to government policy – and no one has been fired, lost a job, or held accountable for it at all. If, for example, four diggers were killed in Afghanistan after being sent on poorly planned mission, what do you think the coverage in the media would be like?
We’re not having a go at the current government here. We’re having a go at complacency about the costs of an expansive and intrusive and meddling know-it-all Nanny State. Not just this Labour government either but ALL government. The idea that make-work programs to spend money in a Keynesian fashion are cost-free and benign is a fraud. They are not.
In fact, these ambitious and modest “government initiatives” alike, from healthcare to insulation are always and everywhere prone to just this kind of result. Policy makers might feel smart and morally superior spending other people’s money to produce “outcomes.” But the outcome is never what you expect, and usually worse.
Economically, when the government pours money into a market, it distorts all the incentives and leads precisely to this sort of hazard. In this case, the fact that it offered a rebate to install insulation attracted a lot of new installers. Whatever happened next – who knew what and when – is still unclear. But how it all started couldn’t be clearer – the government decided to blow $2.5 billion because it thought it ought to do something about the economy and this was a casual, victim-less way to do it.
It did something alright. And four people died. That’s a fact. And hundreds of Australian houses may now have electrified roofs. Millions and perhaps billions more will have to be spent to remedy the problem.
If you believe that government spending creates prosperity, then you could rationally argue the faulty program is actually a net economic benefit (despite the death toll) and a huge success. You could argue that it’s making more work for uninstallers and electricians who will have to go back and fix things. And then there are all the extra man hours for inspectors to make sure it’s all proper.
This is perfectly rational under the logic that spending money is good to stimulate aggregate demand. As long as people are busy, no distinction is made in the GDP figures between production and destruction. It’s all work all the same.
And to follow it through to its logical conclusion, we suggest the government hire an army of unemployed Australians, pay them money to bake bricks, and then march through the streets of every CBD in every capital city in Australia breaking as many windows as possible. Think about how much prosperity that would create!
Just remember, the government can never create wealth. It can only take money from one person and give it to another. You can argue, and many on both sides of the political spectrum do, that government ought to redistribute wealth in order to achieve “desired social outcomes”. Elections are held to put these propositions to the people for a vote. But even if the result is democratic, it certainly doesn’t result in wealth creation.
More on Australia’s production possibilities frontiers and how to save the country from a gradual decline into a Statist nightmare in tomorrow’s report. We’re off to Perth to see the boom first hand speak to a room of libertarians about why they should all be institutionalised. Until then!
for The Daily Reckoning Australia