Aid an investment, not discretionary charity

Harold Macmillan once famously criticised a successor British Tory prime minister over the privatisation of public assets for selling the family silver to pay for the grocery bill. He was not, as some seem to think, criticising policies of returning to private ownership that which had been controlled by state capitalism. He was objecting to a tendency to regard the money coming back from such sales as income, able to be spent on the ordinary outgoings of government rather than to retire public debt. Australian governments typically, but certainly Coalition ones, have not usually made that mistake. They have self-consciously used the proceeds of asset sales either to retire public debt, or, in certain cases, to create capital funds for particular purposes, including future superannuation liabilities, funds for university capital expansion and for medical research. Each is well capable of being described as an investment for future generations of Australians. This is good policy. Over recent months, Prime Minister Tony Abbott has repeatedly referred to the former Labor government raising debt on the national credit card, and of the problems caused for ordinary operations of government when one has to find a billion dollars a month in regular payments, as it were, on that credit card.

That is all very well, although analogies between government finances and domestic household accounts can be taken only so far before they cease to be of much use. By no means is all borrowing imprudent, in particular if it is being done by way of investment in the future and in an improved economy. Australia was built on considerable public debt: for road building, railway construction, bridge building, ports, electrification schemes, communications and natural gas infrastructure, irrigation and water conservation, and programs to provide water and sewage services to urban and town communities. The politicians and public officials who borrowed money for such infrastructure – or equally valuable investments in hospitals, public health programs, aged and childcare facilities, schools and universities, even sporting ovals, national parks and environmental amenities – were investing in the nation's future, wanting a healthier, safer and better educated population, more able to communicate with other Australians and with the world. In early nation-building, government authorities typically borrowed relatively cheaply (in part because government guarantees, and, sometimes, tax concessions for lenders lay behind the deals), and borrowed long, to a point where it was claimed the public had paid several times over for the cost of constructing the Sydney Harbour Bridge. We may question the wisdom, or long-term benefit, from some of these investments, but not that they have been collectively critical to the Australian standard of living, and our capacity to sustain its growth. 

The call on the resources necessary to repay the debt is obviously a political consideration, to be juggled against other calls on public money. This process, unfortunately, is badly affected by modern fetishes against government debt, against budget deficits, and against the conscious deployment of government spending to smooth out or stimulate growth in different parts of the economy. Some, for example, suggest that borrowing money involves taxing future generations, or passing on to them the costs of present national extravagance. That might be true, up to a point, if borrowed money was simply propping up the deficit, or being wasted. It is not when it is building roads, schools, hospitals and other public goods and services which will be available to (indeed, probably taken for granted by) future generations of Australians. Those generations may not immediately recognise how much their standard of living and security stands on the collective efforts of past generations of Australians, but the chances are that when they do, they will not begrudge themselves sharing in the toll. 

This week, the London Telegraph newspaper argued, as some Australians here argue, that foreign aid and disaster relief funds should be restricted, particularly in deficit times when, in effect, money is being borrowed to be sent abroad. ''Since we borrow the money for the aid, we are asking our children to fund our philanthropy,'' it said. ''Where is the morality in that?'' Perhaps none in the sense of serving sheer disinterestedness, which may be a better subject for private charity. But nations give aid to other nations not merely because we feel sorry for them, but as an investment in peace, a better and healthier world, for economic, social and cultural development, and so as to build good relations, whether between nations or peoples. That this is a serious investment, and one which pays dividends, ought to be obvious, not least when nations contemplate how much they are simultaneously investing in defence, and the local, national and international breakdown of the peace. Aid, for Australia as much as Britain, is a selfish investment in our own security and peace of mind, not an economically dubious frivolity.