System held together by workers' goodwill

Peter Lyons writes in praise of the public service.

My elderly father has had major health issues over the past year. We have had numerous encounters with the public hospital system. The nurses, doctors and support staff have been superb in their sense of duty and care.

It is obvious they are motivated by compassion for others. Despite the stress and sadness, it has also been a heartwarming experience because of these angels. Over the past few decades we have lost sight of the fact that those who embark on careers in health care or education usually do so out of a sense of duty and a desire to serve others.

It is called public service for a reason. Free market ideology is based on the premise that government employees are less efficient than their private sector counterparts due to a lack of monetary incentives.

My fleeting experiences of the public health system and my extensive experiences in education suggest to me that monetary reward is not the primary motive for people in these occupations. This is not to deny that they wish to be paid a decent salary.

Yet politicians persist in their belief that performance pay and using dubious statistics to quantify results will improve outcomes in these sectors. They constantly restructure and reform in attempts to squeeze greater efficiencies out of the system.

They propagate the belief that our public sector is bloated and inefficient. If only it was more accountable to competition and market discipline it would function in a magically efficient way like banking and finance.

The reality is that constant reforms and budget cuts serve to erode the goodwill of public servants. It is this goodwill and sense of duty that allows these threadbare systems to function effectively. It is not an inept public sector that has hindered New Zealand's prosperity.

The central problem has been appalling policy decisions. In the mid 1970s, New Zealand had a standard of living on par with Australia. Our living standards are now less than two-thirds of our neighbour. While minerals matter, good policy matters more.

Examples of bad policy decisions include Robert Muldoon's canning of the compulsory superannuation savings scheme in the 1970s. The Muldoon administration was also responsible for the poorly conceived and executed Think Big projects of this period.

The Rogernomics reforms in the 1980s included the sale of prize public assets at rock-bottom prices to mainly overseas buyers. This process also gave monopolistic power to outfits such as Telecom that proceeded to gouge consumers and inhibit technological progress. Most of the profits from the privatisation process went offshore and still do.

The Douglas reforms contributed to a massive surge in unemployment, partially due to lack of transitional assistance for those affected by the sudden changes.

Unemployment in the 1980s rocketed by over 170,000 resulting in a huge loss of potential output and incomes. The growth in unemployment was often blamed on the sudden emergence of a large cohort of shirkers in our society.

The reality was that many ordinary Kiwis were blindsided by the rapid changes which had not been signalled by the incoming government.

We were mugged by an ideology. The deregulation of our financial sector contributed to the 1987 sharemarket crash. More recently, our lightly regulated financial sector resulted in the finance company collapses with a huge loss of wealth.

Banks operating in our laissez faire financial environment make record profits in tough times by feeding our addiction to housing investment in a severely distorted market.

Poor policy settings continue to cost us dearly. It is a well perpetuated myth of modern capitalism that a teacher, doctor or nurse who steps out of the public service into the same role in the private sector suddenly becomes a hyper efficient, high performer due to monetary incentives.

It is the goodwill of thousands of workers in public health and education that holds the systems together.

 - Peter Lyons teaches economics at Saint Peter's College in Epsom, Auckland, and has written several economics texts.