Furious Fridays: What should the government be involved in?

Hi Guys and welcome to Finance and Fury the Furious Friday edition. This is part 7, the last episode of the miniseries about all things politics.

1. Sorry it took a while to cover, I wanted to do this topic justice and explain all the steps and outcomes instead of jumping to conclusions.
   • We have covered a lot, there are many bits of the puzzle. Who, what, how, why, and potential outcomes –
2. We have been through the Fabians, the political spectrum and democracy, then how a population is organised (Rules For Radicals), the fair go, then political progress for equality, then how the west got to be in such a good position, and how we may lose it.
   • If you made it all the way through, awesome work. Thanks for listening to me rant on this

Final part: What should the government be involved in?

What services should they be involved in? To start: Have a quick real-world example to look at

1. US Government Shutdown: It’s been almost a month, shutdown since 22/12/18. It’s the longest in US history, everyone has called it a crisis
   • Over border funding: $5.7bn for a wall, already compromised to make it steel rather than concrete
     • As a comparison: US gave Israel $25bn to help build their wall
       • Total Government spending (the Fed, States, Etc) is $7.56trn: this is $20.7bn spending a day
       • The Wall is a 0.07% cost to the budget for the year
     • Enter the blame game: Irony is Schumer and Pelosi were in favour of a wall: Until Trump came along. Showing it was mainly just talk
     • More political infighting: First time I have seen Democrats oppose spending more of someone else’s money

2. Question: is the US still spinning? Is life going on?
   • The longer that the shutdown occurs, the more people in the US are waking up to how little they need it
   • But not for the Government workers and the IRS (their tax department)
     • Workers aren’t being paid, but they will be. They will get back pay, for the time of the shutdown whilst they were not working. Is that a good deal?
     • But private citizens are stepping in, picking up trash in parks and helping where they can
   • Truth is that the Government has little to do with lives directly, unless
     • It is paying you, it is taxing/regulating you, or it is arresting you
     • Indirectly though, unfortunately, it affects all of our lives

Leads to the last part:

What should the Government be involved with, or provide for a country?

1. This differs for where you sit on the political spectrum. It’s no secret which side I sit on, I value individual freedom and empowerment rather than the group thinking that everyone should have equal outcome
2. For this episode, I will try and put my bias aside. The measurement for this episode is: has there been a net positive benefit or loss to a country based on Government Intervention? Progress from betterments to our lives, more freedoms, better health, etc or does it detract?
3. Excluded “moral hazards”, not saving money because of the knowledge that the State will provide an age pension and subsidised housing, and over-use of “free” health services in the absence of price signals to consumers. All of which isn’t really free
4. Won’t have time to do this topic justice in 30 minutes. I will give the 1,000-foot view. If you are interested in a deeper dive, let me know
   • If I don’t explain something fully, or you disagree, let me know as well!

 

What the Government is good at: Net positives

Funding: Science and R&D. For the past 100 years, most advancement is in fields with the most money and manpower

1. Technology and science: Government Funding has been great. Advancements over 100 years have been from this, like medicine, the internet etc
2. Technological advancements in weaponry and nuclear science during the WWII. Government Funded
3. Rocketry and telecommunications during the Space Race. This was all Government Funded
4. Concentrating a large number of engineers and scientists to work together on the same project will, almost every time, produce more net advancement compared to if every member worked alone.
5. DARPA (Defense Advanced Research Projects Agency) Funded things like the Internet, Google and Google maps, Windows, WWW, video conferencing, Siri, GPS, Facebook
   • This is good: there is a measurable benefit, which the population adopted. Through being a demonstrable fact
   • Most major developments come when the government diverts large budgets to achieve progress (rockets and planes). A vast difference in plane technology from WW1 to WW2.
     • Major boost to development, with the failing of technology progress through history, boils down to individuals with no money or ability to share it
6. If research and development are financed by investors, they want to see as high returns as possible
• Okay for measurable technology, like integrated circuits, they’re very competitive. If your circuits are faster and cheaper it can boost profits for your company.
• Other forms of technological progress. Less quantifiable as potential improvements, the outcomes are unknown
• If they not seen as profitable less funding from the private sector is likely
7. But this is only part of the story. The acceleration of technological progress suspiciously correlates with the population growth
   • A higher population creates a higher net number of scientists /engineers, who can provide more research/work
   • China was advanced until the 1400s. There was a trial by error: high populations, then the EU took over with trial by experiment
8. The issue: The Government mandated and Government ran research. Government bodies paid to research problems will always find a problem. What happens if there is no problem? No money, so then there is no social platform to run on
   • As long as the Government doesn’t take over tech or directing the research, but acts as an investor, this could even make money. Just like universities.
   • It’s a double-edged sword: The faster things change, the more creative destruction. This is not a bad thing. For example in the past with farming, too much at once is bad and it creates unrest. The Government doesn’t like it, and the population gets unhappy with them.
   • Other research: $850,784 for a study of Italy’s Catherine de Medici, a noblewoman who became queen consort of King Henry II (King of France) 1519-1559. Is this needed?

  National Protection and services: All good

1. Police and Firefighters: Emergency services workers all help the population. They protect and keep us safe, and enforce the rule of law.

  On the Fence: Positive and negatives preface Education and health are perfectly fine But not perfect with funding models: there are no incentives to minimise costs, it’s the opposite. If you don’t use all of your budget, you won’t get more to use next year 

1. Infrastructure: On the fence, It is needed but at what cost?
   • East West link in Melbourne: Estimated $800-900m has been spent on a road to never be built
   • NBN: has cost at least $50bn to date and simply a huge high-risk mistake, no private company would ever have built it. (Rudd) The government ignored improvements in wireless technology and continuing moves away from landline. NBN will face stiff competition from 5G mobile technology and sold at a huge loss. Valuation only at $10bn
2. Health: National Health is declining even though we are more advanced than ever
   • Cost blowouts: Royal Adelaide Hospital is the 3rd most expensive building in the world (per square foot) it has 600 beds and cost $2.5bn
   • Still teaching the food triangle that depicts that carbs are great, but stay away from healthy fats and proteins
   • Where do most of the world’s advancements in medical technology and medication come from? The USA.
     • If Americans didn’t have a profit system, we would not have most of the meds or medical tech we do
3. Education: Is great. But, where have you learnt more? At school or on the job? If still at school, it’s hard to answer
   • I am no expert, I need to learn more. I have got a few books by John Gatto and others to finish
   • What I do know so far? Government Education is a new concept in past 100 years, it’s modelled around factory workers
     • Education levels are higher now, looking at literacy rates. Was it government policy, or a changing world?
   • When the Government took over in the early 1900s, the population needed to work, not go to school (Farmers, etc). it forced education they didn’t need, there was low attendance.
     • Today there is a higher % of population in non-trade/construction/manufacturing positions
   • All schools private: More competition, lower fees all around. 35% are independent/ catholic currently
   • But wouldn’t work: not really private, Australia has no-profit schools (private higher education does, there are 170 of them)
   • Australian Average Education is $20-30k for independent schools. One of the highest education costs in the world
   • What might help: Education (Self Education focused on the individual around needs)
     • I went to school in Austria for a while. The system is set up more for the kids’ interests
     • There are nine years of education. Then there are a series of vocational-technical and university tracks to follow
       • University, gymnasium, and Trades like the Polytechnische Schule
     • Putting everyone through the same meat grinder ends up leaving everyone behind, becoming a learned helplessness

What it hurts

1. Economic: The quest for equality, where most research funded from the government or special interest groups show the need for government intervention with this
   • In the early-20th century: the view that progress was being stifled by vast economic inequality
     • The cause was minimally regulated laissez-fairecapitalism with monopolistic corporations;
     • Often violent conflict between workers and capitalists would erupt due to the claim, so it needed to be addressed
   • Sherman Antitrust Act: made it illegal for anti-competitive practices (monopolies, cartels, predatory pricing) in the 1890s
     • This was helpful and helped improve competition and remove monopolies
     • But is it obsolete? 60-80% of advertisements through Facebook and Google. Twitter and their competitor Gab just gets shut down
   • 21st Century: Legislation to redistribute, which is not so good. Tax people to pay for things for others, in other words, Social Democracy
     • Welfare state: Reliance on government also increases what revenues governments need
     • Tax: Mandatory financial charge imposed on the taxpayer by the Government
     • From 1915 to 1942 Income taxes were introduced. A relatively new concept in society as previous taxes were on wealth and land ownership
       • Rome had a 1-3% tax on value of wealth owned for citizens, in times of war you got a vote if you paid tax
     • Progress: Everyone gets a vote and can vote for more redistributions, changes voting a bit

2. Equality through social organisation. A change of policy to affect the population, where we get political activism
   • Question: Is it better to let people choose to adopt something or are they forced to?
   • Legislate for compelled compliance in society, introduce laws to control society. Make it the way progressives want
     • Governmental power of the population is increased when some of the population want it
     • Issues: Speech (limits freedom) with racism and ‘speech laws’, or ‘hate speech’ who defines hate?
       • Already illegal to incite violence through speech, telling people to hurt someone
   • Sonja Kruger was taken to court for blasphemy for her comments 2 years ago about a ‘Muslim ban’ in the US
   • Only from nations with links to Terrorism, not Indonesia (1# for Muslims), or Egypt (1# for Arab)
   • Claimant took her to human rights tribunal, she pays costs upfront and taxpayers pay for claimant
   • The individual is the extreme minority. If you don’t protect the individual’s rights you are failing at protecting minorities. Islamophobia or homophobia is incorrect terminology as a phobia is an irrational fear
   • Rewriting history to suit a narrative, Australian History lesson: Labor party was the one who implemented the White Australia Policy, the ALP wanted more direct methods of exclusion than the dictation test
     • Menzies and Holt (two Liberal Conservatives) were the ones to start dismantling it. Interesting how perception changes
3. Environment: Is the improvement in cleanliness from Government Regulations, or from improving technology?
   • Nobody wants to see pollution or to ruin the earth. But for all the taxes on climate change, what benefit is there?
   • Water: Green/ALP opposition to building new water storages. State governments tried to reduce demand by increasing prices (also generating revenue). Haven’t had a dam built for a capital city since Melbourne’s Thomson Dam in 1984
     • Drought reappeared from 2003 to 2010. There is little scope for further water savings
     • State governments panicked and rather than build dam, they started spending on desalination plants (massively more expensive to build and operate than storage dams that can fill at virtually no cost).
     • Melbourne plant cost $4 billion, Sydney cost $1.803 billion, Gold Coast cost $1.2 billion, and Adelaide plant cost $2.2 billion
       • Sydney plant’s costs are more than $500,000 a day, and it has not supplied any water since 2012
       • Desalination also uses enormous amounts of electricity and (despite not being used) is responsible for adding $100 to $200 annually to household water bills.
4. Electricity: Destroying electricity system, replacing cheap and reliable coal-based generators with wind and solar power.
   • Electricity costs are double those of US and Canada. Power prices have increased 60+% in the last ten years
   • Huge subsidies for renewables and a failure of regulation are the main causes.
     • Subsidies paid to producers of renewable electricity are $3 billion per year, yet power is more expensive
   • Coal and nuclear are the two cheapest sources of base load power
   • Carbon emissions by the rest of the world. Our efforts to reduce “greenhouse” emissions won’t work
     • We make up about 1% of global emissions, which is high for our population
   • Australia’s shunning of coal or nuclear energy is the equivalent to Saudi Arabia banning the domestic use of its oil.
   • While wanting to regulate prices, we can’t have both (low prices with low supply)
     • Side note: immigration 3rd to 1st world, individuals use 20 times the emissions they did previously. Logically, for lower emissions, against immigration automatically as it increases emissions being produced.
   • How far do we go? Currently, people want the Government to have large involvement in ‘combating climate change’
     • Religious fervour about it, like modern blasphemy
     • Again, nobody wants to live in a toxic environment (pollution). But, everything is relative.
     • The US in 2009 gave $26.1bn to climate change, $641m was climate science
       • You are a scientist, it is easy funding and good pay. But have to prove that the problem is there, just like before if there is no problem, then no money
   • School kids and protesters demanding the Government drop emissions
     • We are the ones that emit, but they need a parental figure to walk in a fix the problem for them
     • Introducing stresses in their brain which increases cortisol. A constant confusion, fear of climate can lead to long term negative impact on brain development

To wrap up this series:

1. A lot of what the Government does can be handled by the private sector
   • If private companies or employees don’t perform, they get replaced. The Government never replaces itself
2. What you can do:
   • Talk about politics (only if you are interested). There is a stigma in society about talking about politics, why? Best way to have population avoid it altogether if it is never spoken about, and then no need to pay attention and removes the possibility of people discussing ideas
   • Same with money, it’s impolite to talk about money? Why?
3. Opening facts into the public conversation, it makes people think for themselves, not just repeat false rhetoric
4. Most people know more about what is happening in their favourite tv shows than in politics. The tv show has very little impact on your life compared to current political events.
   • Opens a debate about the issue, rather than silencing one group, everyone should be heard
5. Don’t be afraid to speak your mind, learn as much as you can for what is relevant
   • Make your own path in life and be less reliant on external forces. This is what gives you individual liberty
   • Which is at the heart of financial freedom!

  If you made it through, thank you very much for listening to this series. I hope it wasn’t boring and was actually interesting. If you have any questions or want me to explore one of these topics further, you can let me know on the contact page here.