The AFR had a very small article the other day written by Tony Shepherd that I wouldn’t have paid much attention to except that he is now going to run the Commission of Audit. One can only at this stage hope that the Commission does its job and raises the alarm about how our productivity is being wasted by governments in ways that lower our living standards and reduce employment. It is my strong belief after many years at the Chamber of Commerce and watching the ways of politicians, who respond to political rewards and not to economic, that governments should never allow themselves to think that anything they propose to produce will ever make the economy stronger, raise living standards or add to the number of jobs.

There are now a series of traditional areas for governments. National defence and roads which no one else will do. Schools, public transport and hospitals which may not be done to an optimal extent so we often find the private operators supplemented by the public. And there are a few natural monopolies that may require a more than usually heavy handed form of government regulation or even involvement. But after that, the governments should not involve themselves in any form of production whatsoever.

We have a market economy, and the plain fact is that most forms of production do not take place in the kinds of places politicians want to show up at to cut the ribbon when they are finally opened for business. You know, things like steel mills, mines, concrete producers, car washes, supermarkets, paint factories, paper clip and toothpick manufacturers. You know, the tens of thousands of small and detailed forms of production that are necessary to our wellbeing that spring to life as if from nowhere because there are profits to be made and which hire most of the people in this country who have jobs.

My article comments on a number of statements in Tony Shepherd’s own article which raise real concerns in my mind. Here are those statements:

“Governments and business and community leaders are increasingly united in recognising the merits of selling publicly owned assets to unlock funding for badly needed new infrastructure.”

“Contributing to a rethinking of privatisation is the opportunity to draw on superannuation funds as an alternative source of infrastructure investment.”

“The private sector can shoulder the lion’s share but governments will continue to have a substantial funding role when it comes to non-commercial or social projects.”

“We should be seeing a virtuous circle where governments funds get good projects started and, once the asset is mature, it is then sold.”

“Governments should be encouraging more private investment in green field projects by properly dealing with the problem of early market risk. There are ways to use the government balance sheet to do this.”

If these statements don’t raise dark thoughts in your own mind you should read my article. In fact, you should read my article anyway because there is likely to be a lot more of this up for discussion by a lot more people than myself in the years ahead.