Monday, August 9, 2010

Going beyond the headlines on government spending

Ross Gittins had a very good column on the weekend about the Government's Building the Education Revolution Spending.
Media reporting and opposition politicking have left many people with the impression much, if not most, and maybe even all of the billions spent on school buildings under the Rudd government's stimulus package has been wasted.
It's an impression based on the piling up of unproved anecdotes about waste or rorting of particular school building projects. Which means it's an impression that's not genuinely ''evidence-based''.
Enough anecdotes have been produced to demonstrate that some degree of waste has occurred. But that's hardly surprising: there's a degree of waste involved in most spending, public or private.
The real question is how significant that waste has been. And no amount of piling up of unproved allegations can satisfactorily answer that question. Only a thorough investigation of the complaints can determine the extent of the waste and the reasons for it.
It's important to understand - as most people don't - that news reporting practices aren't intended to give us a representative picture of what's happening. Indeed, what's ''newsworthy'' is often quite unrepresentative.

It's worth considering that news reports on the BER spending are not representative of what has been a wholly worthwhile program.

There is no doubt that there has been some significant and probably unavoidable waste (given the haste of the spending). Governments will need to study the roll out to avoid such excesses next time. My guess is, however, that the eventual realisation will be that the production of new buildings and facilities has been an overwhelmingly positive development for schools.

Internationally renowned economist Joseph Stiglitz praised the stimulus as perhaps the best designed in the world and left no doubt about where his political allegiances lay:
"You would have had high unemployment, you would have had capital assets not fully utilised, that's waste," Stiglitz told a conference in Sydney.
"So your choice was one form of waste versus another form of waste. It's judgment of what is the way to minimise waste, no perfection here, and what your government did was exactly right."
By contrast, Stiglitz said Abbott had "praised the architects of the global financial crisis" and could lead Australia into difficulty.
This is what he said in full on the 7.30 Report
JOSEPH STIGLITZ: I did actually study quite a bit the Australian package, and my impression was that it was the best - one of the best-designed of all the advanced industrial countries. When the crisis struck, you have to understand no-one was sure how deep, how long it would be. There was that moment of panic. Rightfully so, because the whole financial system was on the verge of collapse. In that context, what you need to act is decisively. If you don't act decisively, you could get the collapse. It's a one-sided risk.
KERRY O'BRIEN: There's been a lot of criticism of waste in the way some of Australia's stimulus money was spent. Is it inevitable if you're going to spend a great deal of government money quickly that there will be some waste and can you ever justify wasting taxpayers' money?
JOSEPH STIGLITZ: If you hadn't spent the money, there would have been waste. The waste would have been the fact that the economy would have been weak, there would have been a gap between what the economy could have produced and what it actually produced - that's waste. You would have had high unemployment, you would have had capital assets not fully utilised - that's waste. So your choice was one form of waste verses another form of waste. And so it's a judgment of what is the way to minimise the waste. No perfection here. And what your government did was exactly right. So, Australia had the shortest and shallowest of the downturns of the advanced industrial countries. And, ah, your recovery actually preceded the - in some sense, China. So there was a sense in which you can't just say Australia recovered because of China."

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