Why government reforms often do more harm than good

03/08/2021

Why government reforms often do more harm than good
Many reforms have been done well and benefited Australia.

Sydney Morning Herald, 2 August 2021

This is a good article from Ross Gittens on why many government reforms since the 1990s have often done more harm than good - electricity generation and ports in NSW being two examples where consumers have been screwed.

In contrast, reforms in the 1980s and 90s were mostly beneficial. Reforms of electricity in Victoria, telecommunications, aviation, banking are all examples of beneficial reforms.

But I consider the privatisation of Telstra was done very badly - it was the first privatisation done to fix the Budget, so it shouldn't count as a reform. The experience with creating the NBN is ultimately an attempt to re-nationalise the telecommunications backbone.

“Privatising assets without allowing for competition or regulation creates private monopolies that raise prices, reduce efficiency and harm the economy,” says the head of the ACCC, Rod Sims.

Why would governments do such a terrible thing? Because they put short-term budgetary pressures ahead of the best interests of their voters, as consumers, and business-users of essential services. It’s actually part of a trick that buys the appearance of good management at the price of paying more than necessary for essential services from now on.

The pollies say: “Look at how much I got for that business, look at how I’ve got the budget back to surplus and reduced government debt, look at how I’ve kept our triple-A credit rating”. (Just don’t look at how much more you’re paying for electricity, for using the airport and for imported goods.)

Adding to these short-term budgetary temptations is the way politics and public policy have become more tribal, more public bad/private good. It follows that merely by changing the ownership of a business from government to private you’ve made it more efficient.

But that’s not economics, it’s just prejudice!

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Why government reforms often do more harm than good

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