08 September 2008

what shall we do with a drunken sailor?

I shouldn't be, but yet I always am, amazed by the inconsistencies that the media, pundits, opinionistas (and opinionistos, I s'pose) exhibit in their attempts to get the rest of us to see things their way.

Today's example is the editorial in the AFR, not on line free. It's about the rotten state of the State of NSW and why it's important to the economic well-being of the rest of the country that NSW get back on its feet. Quite rightly, it focuses on the varied misdeeds of the Carr and Iemma governments and the Labor political machine behind them that is, to all intents and purposes, the actual government. Quite rightly again, it then goes on to argue that the entanglement of half-arsed political jockeys is not necessarily a sustainable basis for good governance, and so on and so on.

Then it decries the fact that NSW hasn't competed for investment, jobs and so on. Now if NSW, rather like some other States we could name, started throwing incentives around like a...oh, I dunno, a drunken sailor...how do you reckon the comments would go? Misuse of taxes, distortion of investment into optimal sectors, crowding out of private investment, and so on and so forth. You can just see it, can't you?

Well? What makes the current environment so different? NSW actually had an agreement with Victoria and SA that they wouldn't compete for investment: after all, the Productivity Commission produces a boilerplate text book each year lambasting precisely this practice. Should be a Good Thing, then, eh?

Because of course part of the structural reason that NSW is in its $1b black hole is that it hasn't privatised its electricity industry, according to the usual neoclassical economics rule book. So Standard and Poors, the people from whom you could until recently buy an investment rating in return for a quick sniff of your sister's underpants, is going to downgrade NSW to AA+? Smells a bit like two bob each way to me, to carry the olfactory metaphor a bridge entirely too far.

Not only that, but this whole story omits the role of the recent federal government, whose leader moved most of the functions of national government from the national capital, where most countries locate theirs, to Sydney, and spent no little effort building up Sydney as Australia's only global city, unquote, financial capital, unquote, and so on. So why would the State government throw money at attracting investment when the Commonwealth (and I do love that word) is doing it perfectly well on its behalf, I ask you?

Finally, is it not truly amazing that, with only a little effort, the blame for any bad thing that has happened anywhere around these realms since the year dot can be ascribed to John Howard? I mean, it's perfectly freaky.

So it must be true.

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