No merit in Rinehart's welfare whinge

Should Australian politicians turn to business leaders for policy insight? Not if Gina Rinehart’s recent comments are any indication of the quality of insight on offer.

Last week Rinehart, writing in Australian Resources and Investment, was on the attack over welfare and entitlements. Australia “are living beyond their means”, Rinehart wrote. Rinehart’s view is that Australia spends too much on welfare, that too many people receive it and that we are on an unsustainable path of entitlements. Her solution is to lower taxes, lower spending and work harder. According to Rinehart, Australian leaders should look to former UK Prime Minister Margaret Thatcher for inspiration.

There are multiple issues with this line of thinking.

First, although the number of welfare recipients has increased over the past decade, the share of the population on welfare has actually declined. In 2002, 24.9 per cent of the population received some form of welfare payments compared with only 22.1 per cent in 2012. Welfare was actually a greater problem for the Howard Government and not a socialist issue, as Rinehart inaccurately believes.

Second, how do we know that we spend too much on welfare? What metric are we using? The unfortunate reality is that inequality has increased over the past two decades. Doesn’t that suggest that we spend too little on welfare for the poor? Or we have cut taxes too much?

Rinehart has taken an ideological approach to government spending. Government spending = bad. Tax cuts = good. But it is an overly simplistic approach to public policy. It makes for great sound bites or a good read, but doesn’t offer a valid approach to addressing policy issues.

How can lower government spending and tax cuts address the aged care problem? Estimates from the Productivity Commission suggest that an ageing population could increase aged care, aged pension and health care expenditures by around 7 percentage points of nominal GDP by 2059/60 (Pension privilege in the crosshairs, February 25). Perhaps the elderly could simply work harder -- or just die earlier?

Rinehart doesn’t have a solution to the aged care problem. Her comments are focused on other forms of welfare. Like so many people, she seems seduced by the tabloid or Today Tonight / A Current Affair view of welfare: a group of ‘bludgers’ or ‘rorters’ who take advantage of the system through deception.

The reality, though, is much different. For the poor, welfare can be the difference between attending university or not, buying school shoes and books or simply ensuring that a family eats properly. A child going to bed with a full tummy and clean clothes should be the real face of welfare, but unfortunately that doesn’t sell newspapers or make for good television.

Unfortunately, views like Rinehart’s gain traction in the public. Rinehart is a hugely successful individual, among the richest in the world, and so her views are considered to carry weight. But should they?

Rinehart has no public policy experience beyond lobbying and rent-seeking. She is a businesswoman but not an economist nor an expert on politics or political economy. She has no expertise on social issues or social work or psychology. She is neither a lawyer nor a tax expert.

In fact, it would be quite remarkable if Rinehart could offer valuable insight on social policy and economics. I don’t think the public quite appreciates how difficult it is to be both supremely successful in business and able to offer expertise on a wide variety of other topics. But in Australia -- and globally -- we often expect business leaders to offer insight and value on topics they have no specialty in.

Would you ask Justin Bieber for investment advice? Is economist Paul Krugman the best person to help build your home? And should venture capitalist Tom Perkins really be helping you study for German history? If you answer no, then why would we turn to business leaders to help fix economic or social issues?

Unfortunately, for every Bill Gates, there are countless business leaders who have little to add to the public policy debate. They may be experts in their own field, but are unable to offer expertise to unfamiliar problems. Rinehart is no exception.

Rinehart’s views on the economy -- tax cuts, lower spending and wage cuts -- share an uncomfortable cohesion with her denial of climate change. They are a thinly veiled attempt to make herself richer at the expense of other Australians.

Rinehart has framed this as a left-versus-right debate, but the reality is that Rinehart is simply wrong on welfare, has failed to read the literature or understand the budget data, and has failed to address the real welfare issue: aged pensions and aged care. Australia’s challenges simply cannot be addressed with a prescription of tax cuts and lower spending.

But misguided and opportunistic politics is one thing. The real concern is that people will look at Rinehart’s success and use that as evidence that she must know what she is talking about. Unfortunately, really smart people can be incredibly silly on topics outside their specialty. Instead, we should look to actual experts to provide clarity on the issues of the day.