I once heard an excellent argument by an anarchist.

He was speaking in Stockholm at a free-market seminar to an audience of staunch socialists. They weren’t your run-of-the-mill socialists either. These were highly educated, experienced academics with a pretty good idea of how money works.

This anarchist bravely took the podium and posed a challenge to the audience:

‘Name one thing the government does better than the private sector and I’ll renounce my free-market philosophy.’

Well, you know academics…they couldn’t resist a chance like this.

‘Hospitals!’

‘Roads!’

‘The military!’

Although I’m no anarchist myself, I tend to favour the private sector…so you can imagine how my stomach knotted up as I watched this young man be pummelled with metaphorical tomatoes.

‘The legal system!’

‘Education!’

I could hardly stand to watch as these hollering hecklers shattered his entire worldview.

But once they faded down, he calmly replied, ‘All good suggestions. But, unfortunately, you’re wrong on every single count. Let’s get started…’

And he proceeded to dismember each argument…one-by-one.

‘Hospitals? The Australian government ran a study to compare public versus private hospitals and found that private hospitals charged less for overhead, that hospital-acquired infections were lower, that productivity was higher, and that elective care was timelier…’

In New Zealand, we have a significant private healthcare system. And why has it succeeded when public services are available for free?

‘Roads? Look around Washington DC, and you’ll find half-a-dozen well-maintained privately-owned highways: The Capital Beltway, The Midtown Tunnel, The Dulles Greenway, The Jordan Bridge…These critical pathways in one of America’s busiest cities were built on-time and on-budget through the private sector…and continue to operate in a sustainable fashion.’

In New Zealand, we can look at Auckland Airport as a good example of an infrastructure project that has thrived under private control.

The anarchist continued, ‘The military? Too easy! Ask any soldier who has done tours overseas and they’ll tell you just how many private military company contractors are out there in the warzone. That’s right. Even the warmongering United States hires three contractors for every soldier they have on the ground.’

According to a Beehive release, New Zealand’s government intends on spending $20 billion in the next 15 years…most of which will go to private contractors.

‘The legal system?’ he said. ‘It may be different here in Sweden, but in many developed countries, the legal system is complex and cumbersome. It can be wildly expensive and time-consuming to be represented in simple cases. And state-provided representation can be incredibly expensive for taxpayers to fund. The fact that you typically need to hire someone to handle the system should tell you just how inefficient it is.’

Indeed, even our legal system requires guidance and significant fees to navigate. Even then, 30%–40% of litigants never receive representation, and two-thirds of us lack access to civil legal services. [openx slug=inpost]

‘Education is easy. Students that go through private schools score better and have a higher ratio going to university. But of course, cost is a factor. You might suggest that, in terms of value for your money, a “free” public education is better than a $10,000 private education. But public schools aren’t really free, are they? Every single taxpayer is paying for that school to operate…and research shows that public schools operate less efficiently than private ones. So you’re effectively paying more for less by funding public schools.’

He’s certainly right about most countries, but what about New Zealand?

Here, 95% of students attend public schools. And public schools do well. In fact, we’re well above the OECD average, even in our worst subjects.

But maybe that’s because we all pay so much for it.

The budget for education in the 2018/19 year is $12.26 billion. According to official student rolls, there are about 800,000 students in the system.

That’s $15,000 per student per year, paid by tax revenue.

Which is not far off from what private schools charge as tuition.

In other words, the Ministry of Education could almost shut down overnight and send every single Kiwi child to private school without spending an extra dollar.

 

Where he went wrong

After hearing his systematic annihilation of his critics, I was almost convinced.

But you won’t find the anarchy symbol tattooed on my forehead. Why?

Because I believe there is a place for government.

It’s not in our homes, or businesses, or wallets — but there is a place for it.

It’s a service. To maintain order at a domestic and international level. To allow you and I to live quiet and peaceful lives.

For that service, I’m happy to pay taxes.

But that paradigm has long been forgotten.

Today, the state has its tendrils wrapped around every element of our lives.

And to feed the beast, it reaches deep into your pay check at multiple levels.

  • First, when your business makes a sale — tax.
  • Then, when you’re paid — tax.
  • Later, when you buy something — tax.

And they’re on the verge of taking it even further…

  • If you cash in your investments — tax.
  • Then when you die — tax.

It’s a hungry, hungry hippo…and you’ve got what it wants.

Maybe my anarchist friend was on to something…

Or maybe we’ve already opened Pandora’s box.

Best,
Taylor Kee
Editor, Money Morning New Zealand