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2009-09-07

Government and bureaucrats are abusing economics

Comments on David Burchell “An economist's laugh, but joke's on us”, 7/09/2009, http://www.theaustralian.news.com.au/story/0,25197,26035133-5013479,00.html

The Keynesian’s main approach to macroeconomic policy is to use government expenditures as the main tool to manage the aggregate demand. Since that comes from government, how successful of that demand management depends on the competency and virtue of the government of the day, as well as top economic bureaucrats.

Unfortunately the experience over the past year or so in Australia shows both were not competent enough and the government was too focused on its own election politics as opposed to the nation’s well beings.

The Treasury, the nation’s top economic advisory agency for example, came up with cash handouts that were the dumbest economic strategy to stimulate the demand. Why didn’t it come up with better targeted demand stimulating measures? One can only guess.

The government, on the other hand, came up with the Education Revolution spending to build a school hall or library in each and every school irrespective whether they needed it or not and irrespective school funding needs at all. That has generated huge wastes and inefficiency and now they have a budget overrun and have to increase funding to that program.

The Indigenous Housing projects in the Northern Territory by the federal government is another prime example of how incompetent of both the government and its bureaucratic agencies. So much money and time have been spent and no single house has been built. How competent was that?

While on the other hand, the government is using the crisis as an excuse to increase spending in the name of jobs. Its own doing has been no different in giving some unemployed people and ask them to fill an ABS job survey to say they are employed.

That is not what Keynes had in mind and not true Keynesians are about. That is a gross abuse of economics, economic principles and proper economic and budgetary governance.

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