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Monday 24 July 2017

Why governments always waste money!

A recent Prager video explained why every single government project heralded far and wide as  touted 'nation building' ends up as a fiasco, with uncontrolled cost overruns and not meeting its objectives. The focus of the video is the US healthcare system, Obamacare and its antecedents. But it is equally true for government projects everywhere. In Australia think Collins Class submarines, pink bats, or the NBN.

The underlying cause is quite simply that government is always spending someone else's money, ie ours, so it really doesn't care about cost. Sure the headline cost matters as it an issue for the electorate when the project is first announced, but after this the actual costs barely cause a ruckus. In any case, spin, blame-shifting and plain old bull-dust will get you over the occasional headlines, at least most of the time. As to the quality of the outcomes, it rarely takes any emphasis as those making the decision, will not be in office by the time "it hits the fan". Government sponsored projects are so-called "third party' transactions where the government is not really paying for it, nor are they using the service, resulting in ocst overruns and poor quality outcomes.

Watch the video. It explains the issue perfectly. Simply replace the American Healthcare system by "NBN" and it will apply equally.

We should never let governments take on such projects. Governments role is to create a free market where competing suppliers will ensure the needs of consumers will be met at the lowest price. Imagine if that had been done for the NBN. We would not be faced with the current nightmare with cost overrun more than $50B,  and counting. Nor would consumers face the prospect of being forced to relinquish faster speeds from their current suppliers and to have to pay more for this privilege.

What a fiasco!

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