Public vs private spending

A lot of the left / right "debate" (usually it hardly deserves to be called a debate) centres around who gets things done more effectively. As an accountant I am fully persuaded that by and large, commercial enterprises get things done more efficiently. However I see two major exceptions to that general position.

 

The first is when there is a monopoly - or close to it - so effective competition doesn't exist. Locally I think of the electricity and banking markets as examples. Internationally the oil industry's seven sisters is an obvious example.

 

The second is when there are social issues involved - education, health, welfare and justice. We have seen problems with private enterprise running prisons - although to be fair the state system hasn't always been successful. And we've had a cabinet minister admit CYFS has failed those it's tasked with helping. On a personal level I've seen in both the health system and retirement / rest homes compromises enforced by financial constraints. These compromises often add to the long term cost - and certainly detract from the beneficiaries' quality of life. Of course limited resources and growing demand means that sometimes the quality of life cannot be given all that is wanted.

 

But to me a big issue in thinking about this is that private enterprise has to generate a return on shareholder funds. Otherwise they wouldn't have funds to invest. So they may be more efficient in general - but if we add the need for a shareholder return, then they have to be a lot more efficient to still provide the same level of care.

 

I was going to say "same level of service" - but in both my recent personal cases (health and aged care), the front-line people almost without exception are there because they care and want to help. The same generally applies to teachers, and at least in earlier times (before welfare dependency became so wide spread) to social welfare. Managers and administrators also tend to start off with at least compatible values - but are often forced into line by the system they are in. In fact a tendency these days is to appoint non-front-line people from different backgrounds without  the compassion that sets apart most of the front-line workers.

 

So as usual there is no easy answer - but I'd love to see politicians factoring in the need for a return on shareholder's funds when they're evaluating private enterprise as possible service providers. Of course we still need to keep public services as efficient as possible - but that's enough windmills for one article.

 

 

 

Last Modified

Last modified: 05 December 2020.