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Planning and Prosperity

July 5th, 2013 by Viv

By Viv Forbes, November 1990.

Every year, on the first cold snap of autumn, my wife gets out the electric blanket and ties it back on the bed. This year she got things a bit mixed up so that I had her control switch and she mine.

She likes more heat than I so she turned her control to 3 and I put mine on 2. It felt a bit hot to me so I turned mine to 1. She felt a bit cold so she turned hers to 4. A bit later I turned mine off and she turned hers to 5. About midnight, we discovered the problem – crossed wires in the feedback system.

Most Government Planning and Control systems operate like this.

Bureaucrats feed on a steady diet of taxes and statistics. Many of these statistics are wrong and all are late, so that by the time the planners draw a conclusion, the politicians negotiate the trade-offs and the intervention commences its distortion, the real world is well into the next cycle. Thus government efforts to cool an overheated economy usually start to bite just as the downturn starts. And government stimulation starts to work just as the boom ignites. In this way, centralised intervention usually magnifies the boom-bust cycle.

It is thus of concern to business in Queensland to hear that Brisbane is soon to host a conference on “planning” our growth for the next decade.

If we are lucky, no one from the real world will attend the Goss Gabfest and not much harm will be done. Judging from the past, however, at least some new initiatives will be launched. At best, these will merely provide a sinecure and a sense of power to a few well paid technocrats. At worst, they will do positive harm to our productivity, our wealth and our freedoms.

Every government, especially one in office during hard times, feels duty-bound to conceive at least one Royal Commission, an Economic Summit, a new Industry Council or yet another Government Marketing Monopoly.

The 1961 recession prompted Menzies to commission the Vernon Committee, whose recommendations he sensibly ignored.

Gough pioneered the technique of “Government by Enquiry” – it became his empire on which the sun never set. Malcolm Fraser gave life to the Crawford Committee which recommended such an extravaganza of new bureaucracies that even Gough may have hesitated.

Then came the Jackson Committee which persuaded a more gullible Senator Cotton to set up a network of Industry Councils. Bob Hawke arranged his stage debut at the Economic Summit. He got such a buzz he went on to father EPAC, ONA and the flatulent Commission of the Future.

Don Dunstan pioneered technology parks, which also attracted Mike Ahern. John Bannon pinned his faith on five year plans, Burke and Parker set up WA Inc and Victoria started on its $2.7 billion dollar gamble with VEDC, Tricontinental and the State Bank.

All of these costly and largely useless initiatives were established amid platitudes about “forward planning, efficiency, competitiveness, identification of opportunities, sunrise industries and diversification”. Their only positive achievements were cushy jobs for about 4,000 government economists, fat fees for an academy of commissioners and consultants and a booming government market for computers. (The Commonwealth alone now spends between two and three billion dollars per year on computers).

Surely the premier of our vibrant and decentralised state of Queensland is not so naive as to still believe that centralised government planning can improve economic productivity?

This theory has been demolished by numerous great economists starting with Adam Smith and ably assisted in this century by Von Mises, Hayek, Buchanan and Friedman. For those who rely on practice not theory, we need only to compare North Korea and South Korea, China and Taiwan, Canton and Hong Kong, East and West Germany, or USSR and USA to predict the effect of more centralised planning and control on the total wealth of society and the extent to which it is monopolised by the powerful elite.

We are often told that the success of Japan is due to clever planning by its Ministry of Trade and Industry. Unfortunately the facts don’t fit the propaganda.

As Japanese economics Professor Katsuro Sakoh says, “The Japanese Government has undoubtedly contributed to the economic success of Japan since World War II. The irony is that the contribution has been based not so much on what it did for the economy, but on how much it restrained itself from doing”.

The Japanese government has maintained a stable regime of low taxes, low interest rates, low government spending (especially for welfare), low government research spending and low government subsidies. Where MITI directed its subsidies and attention are the failures of Japan such as agriculture, aviation, aluminium and coal. The great successes of Japan such as auto and electronics, were either opposed by MITI or got no “help” at all. (MITI even advised Honda not to go into cars).

Professor Sakoh concludes, “The lesson of Japan is clear: economic success has been in spite of, not because of, government tinkering.” In short, MITI has been less of a burden to Japanese industry than Treasury, EPAC, ACTU, IAC, BIE, and all the DID’s, DOPE’s, Industry Councils, wage tribunals, Marketing Corporations, State Development Authorities and five year plans have been to ours.

Government is largely a passenger in the economic coach. Quiet, slim passengers can be tolerated, but paunchy passengers are a problem, especially if they frighten the horses or are drunk, dictatorial or light-fingered.

We must recognise the difference between decentralised planning, which is a positive good, and centralised planning, which always produces varying degrees of suppression and dislocation of economic activity. We must curb the universal tendency of politicians to fix things that aren’t broken, plant things that won’t grow, and force-feed things that should be left to die. We must all learn to mind our own business and let the other bloke plan his own life and business. Only when he commits aggression, theft, fraud, breach of contract, trespass or pollution should government intervene.

The energy and creativity unleashed by this system of decentralised planning will always out-perform the best achievements of MITI, GOSPLAN, EPAC, the State Development Corporations or the New International Economic Order.

Mr Goss will host next month’s conference on Planning for South-East Queensland. His contribution should be to produce for his shareholders a credible long term plan to restore profitability, efficiency and service to his complacent and rapacious railway business, his profiteering milk and bread monopolies, his moribund industrial estates and his drab and predatory Housing Commission. If he can’t plan his own businesses, he certainly can’t be trusted to plan the Business of Queensland. (I must admit, however, that all of this excess baggage was created by those other socialist parties).

The slogan for the conference should be “PYOB” – Plan Your Own Business.

PS. Nothing changes. This essay was written 23 years ago. The new government of Queensland in 2013 invited Queenslanders to participate in producing “The Queensland Plan – a 30 year vision for the whole state”. Maybe they should save money and dust out the Goss Plan? If they stuck to planning the government infrastructure they already mismanage and leave us to make our own plans we would all be better off.

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