GREG LINDSAY: Small government is as important now as ever

This year is the 250th anniversary of the US Declaration of Independence and the publication of Adam Smith’s The Wealth of Nations.

Both were pivotal contributions for the freedom and for the prosperity that was to spread across the world in the following years, including to Australia.

They were documents of ideas and philosophy: perhaps the most important since Magna Carta in 1215 in their impact on the practical affairs of government and enterprise.

Today, many of the lessons in those documents have been forgotten or ignored. This loss imperils so much of what we have achieved.

It is now time for some good ideas to come to the fore again, as they did in Australia in the relatively recent past.

The early 1970s saw the end of a long period of Liberal/Country Party government and the election of the Whitlam government.

Being out of power for so long, and wondering how long they would hold it, the Whitlam government embarked on frenetic implementation of their platform.

Key economic indicators such as government spending as a proportion of GDP and inflation quickly became a concern. Federal spending rose from about 19 per cent to reach about 23 per cent over Labor’s years in office. Inflation shot up to about 18 per cent for domestic and international reasons.

Federal spending is now around 27 per cent of the economy. The trend towards bigger government was there, though kept in check to a degree under the Fraser, Hawke, Keating and Howard governments.

Very troubling today is that the federal debt is now about $1 trillion. We can argue about the reasons and who’s to blame, but this is not just some abstract number. It is debt that must be serviced and paid back. This presents enormous moral issues for our society and those who purport to lead it. The figure doesn’t factor in State debt.

The Whitlam years were the cradle period for the establishment of the think tank I founded, The Centre for Independent Studies. This month is its 50th anniversary.

I don’t claim the CIS was the major player in developing ideas and policies that informed the reforms that were to come following the election of the Hawke government in 1983, but we were certainly there to inform the debates and to give people with good ideas a home.

The people involved, mostly academics, and the ideas that they produced and CIS published were seriously important. With the organisation in strong shape now, the chances of injecting good ideas into the troubled world we face are strong.

Some of the conditions that led to the founding of CIS 50 years ago have returned and may, in some areas be worse. We are all aware of time bombs such as the NDIS and less expensive hand grenades such as Snowy 2.0 and the NBN. That trillion dollars can only increase.

Times were simpler 50 years ago and there’s been a lot of change, much of it for the better.

The reform era of the 1980s through to the early part of this century with the opening up of the economy has given us enormous levels of prosperity especially compared to most other countries.

As American economist Thomas Sowell has said: “I don’t have faith in the market; I have evidence about the market.”

The evidence is there and we ignore it at our peril. That we are in danger of throwing some of our prosperity away has immense moral dimensions for the coming generations.

Economist Judith Sloan published an article in The Spectator magazine last month in which she wrote about former MP Bert Kelly, who wrote under the title the Modest Member.

Kelly was a leader in the fight to remove tariff barriers and other blockages to international trade. Sloan said that Kelly was less interested in economics than morality and doing the right thing.

It is worth remembering Adam Smith was a professor of moral philosophy when he published The Wealth of Nations, the foundational text on modern economics.

Sloan said: “There is no doubt that he (Kelly) would be appalled at the massive increase in the size of government and the associated rise in government debt. There is something deeply immoral about government effectively handing out current benefits while handing the bill to future generations to pay off.”

We have guides to how governments might get things under control and restore trust in government and make it occupy a less important part of our daily lives. This can be found in the ideas and policies of the British statesman William Gladstone.

Gladstone was no ordinary politician. He believed that financial discipline was central to the strength and prosperity of both individuals and nations.

By slashing unnecessary spending and resisting debt-funded splurges, he helped restore public trust in government and laid the groundwork for economic growth.

He believed governments should never borrow for day-to-day spending — a view rarely seen in practice now. For Gladstone, saving was a moral virtue. Wastefulness was not just inefficient — it was unethical.

He once famously said any official unwilling to save “even on candle-ends and cheese-parings” was “not worth his salt”. He understood whose money the revenues actually were.

The cost-of-living “crisis” means individuals and governments change how much they spend. If individuals kept more of their own income the crisis would lessen. Governments have to learn to use other peoples’ money more prudently.

So, here we are. Whether it’s a Gladstonian moment or a Hawke/Keating/Walsh or Howard/Costello moment is hard to say. But it is time for some of the ideas that drove those reforms to reassert themselves before we come to realise that we are not as well off, nor as free, that we think we are.

If nothing else, the future generations will thank us for the work and the courage.

Greg Lindsay is the founder of the Centre for Independent Studies.