Sending All The Wrong Signals


Price signals.

You’ve heard a lot about these curious indicators lately.

Treasurer Joe Hockey is very big on them. He claims they are necessary to keep our health system sustainable. “Government services are somehow deemed to be magically free but of course they’re not free,” he said on May 2. “They are paid for by the taxpayer,” he said. “So asking those who use government services to at least make some contribution to their delivery seems a logical and equitable step."

Finance Minister Mathias Cormann agrees. On the morning of the budget, he set out to explain to talkback radio listeners that “what we are doing is identifying areas where spending can be more efficient.” In order to do that, he said, “we can implement reforms that can set price signals so that health funding can be made to be sustainable and affordable into the future.”

Health Minister Peter Dutton has been even blunter. In an interview with the ABC’s Alexandra Kirk last night he tried to defend the $7 co-payment by arguing, simply, that “263 million free services a year is not sustainable.”

Education Minister Christopher Pyne is also a big fan of price signals. The huge shake-up in higher education he has announced will completely deregulate university fees — allowing them to skyrocket for many courses. On Radio National last week, he told Alison Carabine that the current system needed to be changed because — you guessed it — there weren’t enough price signals. “Now, at the moment we have a demand-driven system on the supply side, but no price signal that tells students where the best degrees are to be had,” he said. “The whole point is that the university system is not a level playing field.”

Across the government, the idea of “price signals” has been used as the justification for the draconian attacks on the welfare state. It is the reason trotted out for justifying deregulating university fees and abolishing free universal health care. It is the underlying philosophy behind the neoliberal agenda advanced by the Coalition Government.

What’s so special about price signals? Why is the Coalition so enamoured with them?

The answer is that prices are the core of neoliberal economics.

The position was best summed up by pioneering neoliberal economists like Gary Becker, whose recent death has spurred a number of admiring obituaries in journals such as The Economist and the Financial Times.

Becker was fascinated by the way people responded to incentives. He famously analysed social issues such as racial discrimination, crime and marriage through the prism of the costs and benefits that would accrue to individuals making rational choices about them.

This led to some breath-taking excursions, applying economics to places that many think it should never have strayed. Human relationships, for instance, are really a set of “marriage markets”, in which mates search for partners like products on a shelf. Similarly, Becker thought crime was largely an exercise in which potential criminals weigh the costs and benefits of their wrong-doing.

Becker’s idea of “human capital” has been among his most influential. This is the notion that getting an education is, in a very real sense, investing in yourself. “If you're in an environment where knowledge counts for so much, then if you don't have much knowledge, you're gonna be a loser,” he once said.

Attitudes like this make Becker the patron saint of neoliberalism. As no less a thinker than Michel Foucault observed, Becker saw the rational individual as an “entrepreneur of himself, being for himself his own capital, being for himself his own producer, being for himself the source of his earnings.”

The policy implications were profound. Governments needed to stop interfering with people’s lives. They needed to let the market rip. If this increased inequality, so what? "I think inequality in earnings has been mainly the good kind. I strongly believe it's been mainly the good kind," Becker said in 2007.

These ideas are exactly the ones being used to justify the Abbott Government’s frontal assault on Australia’s social safety net. Listen to the rhetoric of Abbott and Hockey when questioned about their budget measures. Under 30 and unemployed? “I’d expect you to have a job,” Hockey replies. Worried about the huge hikes to university fees? “People who have university degrees will earn seventy-five per cent more over a lifetime than people who don't,” replies Pyne.

This is what happens when policy-makers internalise the logic of neoliberal economics. The value of anything becomes its price — no more, and certainly no less. In this logic, giving something away for free — for instance, a check-up with the GP — means that the people getting that something won’t value it. In a worldview in which prices are the only thing that matter, giving something away for free is an immoral act. The people getting that free health care must therefore be considered suspect. They are getting something for nothing. They are, in effect, abusing the system.

This moral belief in the sanctity of markets, sacralised by the totem of prices, is what is proving so toxic about Hockey’s budget. Ordinary Australians have never bought into the belief that economic value is the only value that counts. They know that many of the best things in life really are free: the love of a mother, the charity of a stranger, the companionship of an old friend. They can also do the sums of their household budgets, and can see that this budget will leave the average middle Australian family worse off.

One of the remarkable aspects of the protests that have spontaneously erupted against the government across the country is just how ordinary the people protesting appear. The students protesting against the massive university fee hikes are not vandals or bludgers. The pensioners protesting against changes to the indexation of their pension are not moochers or leaners. This is a backlash from middle Australia.

There is another thing that the government’s obsession with price signals reveals: its hypocrisy.

Much like Anatole France’s famous quip about the poor and rich being equally prohibited from sleeping under bridges and begging in the streets, price signals tend to be things that the government would like to impose on the poor and the needy, but remove for its wealthy friends and its donors.

Favourable price signals for big business like this are littered through our tax system. If you’re a wealthy investor earning millions on your share portfolio, you will pay less tax on that income from capital gain than a working class cleaner will pay on the income from her wage.

Take the diesel fuel rebate. This is a special tax rebate, mainly used by big mining companies, that means they pay less for their fuel than ordinary motorists. It’s a price signal, all right: one that says mining companies are more deserving of cheap diesel than the rest of us.

Price signals? There’s plenty of them in politics itself. Political parties are constantly receiving donations from lobby groups and big business interests. With breathtaking hypocrisy, they argue that these donations don’t influence their political judgments. What about the price signal Joe Hockey was sending when he charged corporate donors thousands for a budget lunch? What do you think those donors were getting in return?

Why is it that the daughter of the Prime Minister apparently received her education for free, for instance, while the poor and the poorly connected must pay a market price? Could it have something to do with the fact that the educational institution granting that scholarship would stand to benefit from the deregulation of the higher education system?

That’s the thing about price signals: they’re not that fun when you’re the one paying them. No wonder the rich and the powerful prefer not to.

Ben Eltham is New Matilda's National Affairs Correspondent.