October 23, 2014

Horse 1782 - Senator David Leyonhjelm and Spending "Other People's Money"

On Pleasant Crescent there are several blocks of flats. At number 32 Pleasant Crescent is the block called Agincourt. Across the street at number 33 is Beauchamp. Further down the street at number 39 is Cruikshank. Even further down the street at number 46 is Descartes.
All of these block of flats have sinking funds in which the strata holders pay into for the maintenance of their buildings. One day, the strata managers of Agincourt decided that they wanted to reduce costs and so they through a meeting of the Owners' Committee decided to lower their fees. It sounded great for the people who started in the system but for newcomers who joined later, suddenly they found that they had to meet more and more costs for themselves; instead of the building's sinking fund looking after them properly.

As you walk down Pleasant Crescent you stop and think "Sweet Johnny Major!". Before you know it, you've wandered straight into an analogy and into the suburb of Hypothetical (postcode XY22). You should have really realised that after the buildings were named A, B, C and D, shouldn't you?

Which block of flats you prefer to live in, on Pleasant Crescent? All things being equal other than the amount of strata levies that you have to pay for the upkeep of the building. Initially I suspect that you don't want to live in Agincourt. Paying less fees might work for a while but what happens if things really start to breakdown and get old?
What happens for instance if the guttering starts to rust and the tiles need replacing? What about when the lights in the hallways start to go? If there is a break-in down at Cruikshank, would you like for there to be a security guard so that your place doesn't get robbed next? Remember, down at number 46, the people who live in Descartes have started to employ security guards and installed very high steel fences with razor wire. Those residents have also started telling everyone in the street (and very very loudly) that the street just isn't safe any more.

The strata management at Agincourt, have started justifying spending less on maintenance and collecting less in strata fees on the basis that they're spending "Other People's Money"; on the face of it, this sounds prudent and sensible.
What this does do though is shift the question from being purely an economic one and one of mutual benefit to the strata owners, to one of personal responsibility. What happens if a child falls off a seventh story balcony because the railings weren't maintained? Guess what - although that used to be something which the strata managers would have fixed, they now claim that the child deserved to fall because it was up to the owners of that particular flat to look after themselves. Remember personal responsibility? The strata managers do and they enforce it.

Does this analogy sound stupid? What if instead of talking about sinking funds of a strata title building, we look to something larger and talk about taxation in a nation state? What if instead of talking about fixing lights, railings, guttering and tiles, we instead talk about infrastructure, the defence forces and welfare payments?
Are the people who live in a building with its common property and common access really that much in principle any different to the citizenry who live within a Commonwealth? A "Commonwealth" at English Law is a term for a political community founded for the "common good". A similar term might be "Res Publica" from which we derive our word "republic" and means a "public affair".

Now I ask the question: How would we feel if in a nation which likes to call itself a Commonwealth, that someone starts speaking of spending "Other People's Money"? I find this term to be something of doublespeak. If people start to frame political discourse like this, how does that change the nature of political discourse?

Consider this:
If I were to ask everyone in this chamber to turn out their wallets and purses and give me a third of the money in their possession, I imagine there would be some disquiet. If I were to tell you that the reason for taking your money is that I know better than you what you should do with it, I would expect there would be some resentment. What is more, if I explained to you that if you refuse to give me the money, you could go to jail, I expect there might even be some anger.

Imagine that I decided the large pile of cash you were forced to give me was not nearly enough, so I went out and borrowed more, with the cost of the interest to come out of your pile and the debt left hanging over you and your children. Then imagine that I started spending it foolishly on things you do not want. It would be natural to feel outraged. In fact, you should be outraged. It is something most of us would recognise as common theft. Not only that, it would constitute authoritarian, incompetent, irrational, vain, patronising and delusional behaviour on my part. But that is exactly what the Australian government does to the Australian public, no matter who sits on which side of the chamber. Many people would call it stealing, but in this place we just call it another day at the office.
- Senator David Leyonhjelm, 23rd Sep 2014.

What is Senator David Leyonhjelm saying here? Does he believe in the concepts of nationhood or the principles of community? When he talks about spending money "foolishly on things you do not want" what does he mean exactly? What does he think about the example of a child who falls over a railing because the strata managers of the building also didn't want to spend "Other People's Money"? Is he suggesting that when people happen to suffer because of economic hardship that they deserve to? 

Helpfully Senator David Leyonhjelm said other things in this speech which betray his beliefs. 
Far too much of our political debate is restricted to the question of how to spend OPM or, if you like, who is the better dealer in OPM. This is the wrong question to ask because, as Milton Friedman taught us, it is the very nature of the spending that is the problem. A much better question to ask is this: why don't we just let people spend more of their own money?
- Senator David Leyonhjelm, 23rd Sep 2014.

Let's ask Milton Friedman shall we? In Milton Friedman's 1962 book "Capitalism and Freedom", which was set in a time where the United States was undertaking the biggest public works program in history with the "Eisenhower National System of Interstate and Defense Highways" (and thus the biggest ever dealing on "OPM", he actually called for a negative income tax for people below a certain level of income. Isn't that in effect what transfer and welfare payments actually are?

Maybe Senator David Leyonhjelm has a different view of spending Other People's Money. Maybe he's a student of former British Prime Minister Margaret Thatcher:
And Socialist governments traditionally do make a financial mess. They always run out of other people's money. It's quite a characteristic of them.
- Margaret Thatcher, This Week, 5th Sep 1976

Ms Thatcher would not only go on to "run out of other people's money", she also went on to sell "other people's stuff". We saw the same sort of thing going on in Australia in the 1980s and 1990s. We're also seeing it again with the sell-off of Medibank Private, which is a profitable business, which the current government doesn't feel belongs in the common property but rather under the auspices of personal responsibility, should go to those who can most afford to buy it. The revenues which it could have raised (along with a whole host of former government businesses) no longer defray the costs of running government and this make it even more structurally dependent on taxation. 

The reason that this can be constantly foisted upon the commonwealth is that the public's itching ears and sullen eyes are too dull too comprehend what's going on; thanks to progressively defunding education, they're also progressively too stupid. 
Again, on the face of it (like Janus) it sounds as though and is meant to sound as though governments are somehow ridiculously wasteful. I have worked in government and I can tell you first hand that every single government office that I've ever worked in at both state and federal level was so hideously understaffed, that the staff who were there, worked many hours beyond their allotted time and because they were salaried, never even got paid $1 for it. I worked beyond midnight on a few evenings whilst working for the Commonwealth Law and though it easier to go to sleep in the offices than to go home, only to come back at 08:30 the next morning. 

With the rod of personal responsibility, the strata managers of the nation (ie our politicians) can and do beat the people of the nation even harder. Not only that, when it comes to the poor and the old, this discussion is being reframed, so that they actually deserve to be punished.
Tell me, why is it that "dole bludgers" are painted as Public Enemy No.1? Who is really doing the bludging here?
The 90-page look at the the tax contributions of the S&P/ASX 200 between 2004 and 2013 – the first research of its kind attempted – claims up to $80 billion was foregone by the taxman over that period; a sum of money that could all but wipe out the government's past two budget deficits.
- Sydney Morning Herald, 29th Sep 2014.

As an aside, how come I'm forced by law to hand over almost 10% of my salary package to financial institutions who then cream off 2% for doing nothing? All superannuation has to try and beat the market and that's patently impossible as everyone can not beat everyone else; not only that but they have to beat the market by at least 2% in order to make the system worthwhile.
What happens if you are a woman who decides to have children? During the time that you're not working, you're not putting any money into superannuation at all; that has a multiplied effect over 40 or 50 years. That says to me that half the population are being beaten with the rod of personal responsibility harder than others. I'll even go on to suggest that I think that superannuation by operation is inherently sexist.

Speaking of the financial system generally though, banks and other financial institutions only reduce the frictional costs of doing business (and even then, I'm not sure that they even do that any more). Since all payments for borrowings have to be paid back with real work, doesn't this suggest that the entire financial system is basically creaming the top off of "other people's money"? Why is it then that the financial system is seen as virtuous, whilst apparently as Senator David Leyonhjelm sees it, governments are wicked? Who is it that actually maintains and builds common property?

When you think about it, EVERY great institute, every scientific discovery, virtually every endeavour has been the result of a collectivist structure, supporting them in some way. We call these entities, companies, corporations, partnerships, joint ventures, clubs, teams, nations, states, churches, families even. So don't talk about so-called "personal responsibility" because really, in almost every endeavour worth anything great, there has been some "commonwealth" which it sprang from.
Where "personal responsibility" does only extend as far as one's own hands, as far as one's own wallet and as far as one's own desires and motives, then greed comes on his merry way and that despite what a certain movie might have said, is bad for the majority of people.

When Senator David Leyonhjelm speaks of  not spending "other people's money", would he be generous enough to hand back his salary of $195,130 a year? What if we the Commonwealth all decided that Senator David Leyonhjelm was something that we "do not want"? Why would he under his own conditions feel outraged? 

On Pleasant Crescent there are several blocks of flats. Unfortunately too many strata managers who don't actually live in Pleasant Crescent, see strata fees as wasting "other people's money"; so they argue that it should not be spent on the maintenance of the building; nor should it be charged to the residents.
When there's a fire due to bad electrics, or people start dying because the railings are rusted though, then what?

Certitude leads to violence. This is a proposition that has an easy application and a difficult one. The easy application is to ideologues, dogmatists, and bullies--people who think that their rightness justifies them in imposing on anyone who does not happen to subscribe to their particular ideology, dogma or notion of turf. If the conviction of rightness is powerful enough, resistance to it will be met, sooner or later by force. There are people like this in every sphere of life, and it is natural to feel that the world would be a better place without them!
- Oliver Wendell Holmes Jr.

Perhaps Oliver Wendell Holmes was on to something. I rather like his more famous statement about "other people's money".

I like to pay taxes. With them, I buy civilization.
- Oliver Wendell Holmes Jr.

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