The Public Sector Can Never be Productive
Contrary to what the public sector believes, public sector workers can never be productive. The public sector will always be a drag on the economy.
Who would have guessed it.
The government and central bank…
Inject money into the economy…
And bingo!
It creates distortions… that any sane person could have predicted.
But, governments, bureaucrats, and mainstream commentators and economists aren't sane.
Because when the distortions appear, it always takes them by surprise.
Two examples from today's press that were entirely predictable…
The Australian Financial Review reports:1
‘The explosive growth in the $49 billion National Disability Insurance Scheme is sucking workers out of more efficient industries and risks making Australians poorer unless the care economy become more productive.
‘A report from the e61 Institute think tank is the most comprehensive analysis yet of structural problems the economy faces from the expansion of the care sector, which now employs 15 per cent of Australia’s workforce - up from 10 per cent in the early 2010s.’
Let’s get one thing straight. It’s not possible for the public sector to be productive. The public sector is always a drag on the economy.
It always subtracts from it, never adding to it.
But aside from that, we’ve addressed this subject before. We drew the comparison with the National Health Service, which is the UK’s biggest employer.
But quite how it can possibly be W surprise that the public sector draws people away from the productive private sector.
This should be obvious. Every single public sector worker is a lost private sector worker.
Someone who could provide useful private sector services, or help develop, produce, and market useful and on-demand private sector products.
But it’s not enough to only focus on the most productive people.
The less productive and unproductive worker who is drawn away from the private sector to the public sector is also a ‘lost asset'.
The unproductive public sector worker effectively becomes as much of a welfare recipient as any other public worker.
If they only had private sector employment options, they would likely eventually find something they were good at, or enjoyed, or could bear.
Because at some point they would have to be useful to the private sector or else perish in poverty.
Cold, maybe, but fact.
Elsewhere, The Age tells us:2
‘A $188 billion Reserve Bank stimulus program did little for the small businesses it was intended to assist through the pandemic and instead helped turbocharge house prices as banks channelled the cash into cheap mortgages.
‘A review of the Reserve’s “term funding facility” program, which loaned money to commercial banks at an ultra-low interest rate of 0.1 per cent between March 2020 and June 2022, also found the bank lost $9 billion under the scheme as it raised rates.’
Again, it’s impossible for this to be a surprise.
All the players behind the COVID stimulus plans were there at the time of the 2008-09 financial meltdown.
They knew the stimulus back then led to distortions. And they would have know the COVID stimulus would lead to another set of distortions.
Those are just two examples. They aren’t the only ones.
And they won't be the last.
Creating distortions and inefficiencies is just what governments do.
There will be many more to come.
We look forward to seeing you back here tomorrow.
Kris Sayce
Editor, Crack of Doom
Issue 44 of 10,000
(We believe in the importance of setting goals. And we figure what better way than to set a big goal from the beginning. If all goes to plan, our final issue of Crack of Doom will be sometime in the 2060’s!)
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Michael Read, ‘NDIS is sucking in workers from more efficient sectors, The Australian Financial Review (Sydney, 10 October 2024) 5.
Shane Wright, ‘RBA stimulus didn't help business’, The Age (Melbourne, 10 October 2024) 1.