Wednesday, September 15, 2010

Our deprived country folk, and other myths

So, we're back to worrying about RARA - rural and regional Australia. Thanks to the newly acquired political leverage of the two country independents, we're now being told the regions haven't been given their fair share and, in future, "equity principles" should prevail.

There's a lot of righteous indignation on the part of many country people and, I suspect, quite a bit of sympathy on the part of city folk. But there are also a lot of misconceptions.

Many people have the impression there has been a continuous flow of people leaving the country for the big city. It's not that simple. The capital cities' share of Australia's population hasn't been increasing. While there has been a flow of people leaving inland regions for the cities, there's also been a flow of people - particularly the retired - leaving the cities for coastal regions. So many coastal towns and cities (such as Rob Oakeshott's Port Macquarie) have been growing strongly. Their problem is not declining population but keeping up with the increasing needs of an ever-bigger population.

Even with the inland regions it's not simply a matter of everyone leaving for the big city. In many cases it's people leaving small towns and villages for bigger regional centres (such as Tony Windsor's Tamworth).

Leaving aside the sea change factor, people have been drifting from country to city for the best part of a century. Why? Because of the increasing mechanisation of agriculture. There is unceasing pressure for farmers to use more and better machines to replace human labour. Our farms produce more than they ever have, but need fewer people to do it.

With the increased use of expensive machinery there's continuing pressure for individual farms - including dairy farms - to be bigger to better exploit economies of scale. That is, for farmers to sell out to their bigger neighbour and find work elsewhere - in the nearest regional centre or in the state capital.

The pressure comes in the form of their bigger neighbours being able to operate profitably despite falling real prices for their produce - prices at which smaller, less efficient producers can't survive. Real prices fall not so much because of the rapacious behaviour of Woolworths and Coles but because market forces - competition between producers - cause the benefit of economies of scale to be passed on to end consumers (via the much traduced Woolies and Coles). In a well-functioning market economy it's not the producers who win, it's the consumers.

Country people don't enjoy seeing people leaving the district, and small farmers don't enjoy being forced off the land. But are these long-standing trends a bad thing? They're the product of the capitalist system (you're not a socialist, are you?) and the technological advance it fosters and exploits (nor a Luddite?).

The notion that the regions should be given a fair go is appealing, even to city slickers. But what is fair? Country people are convinced they're being ripped off: they pay all this tax, but the city people spend most of it on themselves and send only a trickle back to the regions.

One small problem: it ain't true. For a start, on a per-person basis country people pay less tax than city people do. That's because incomes in rural areas are generally lower and they have a higher proportion of retired people.

What would be a fair distribution of government spending - equal amounts per person in country and city? Actually, governments spend more per person in the country than they do in the city. According to calculations by a government agency, spending on hospitals is 7 per cent higher in moderately accessible regions than in the highly accessible capital cities.

In remote areas the cost differential per person rises to 14 per cent and in very remote areas to 44 per cent.

For schools, spending per student is 12 per cent higher in moderately accessible regions, 34 per cent higher in remote areas and 60 per cent in very remote. The story for spending on policing is similar.

But how is this possible when it's so clear the quality of these services in country areas is less than the quality people receive in the city? It's possible because the cost of delivering services in the regions is so much higher relative to the (small) number of people for whom the services are being provided (and relative to the number of country taxpayers).

It's much cheaper to deliver services to people when they're all crammed together in a big city. Citysiders have economies of scale working for them, whereas country people have scale economies working against them. That's no one's fault, it's just a fact of nature.

When governments install some new and expensive facility in the big city, tens of thousands of people are able to take advantage of it and so reduce its cost per person (and per taxpayer). Were such a facility installed in some small town, the cost per person assisted would be remarkably high. Even if it were installed in a big regional centre, the cost per person would still be a lot higher.

So now you know why facilities are so much better in the cities than in the region: hard economics. If you say that's not fair and people in the country deserve equality in the quality of services provided, you're saying you want city taxpayers' subsidy to country taxpayers to be even greater than it is (so you are a socialist, are you?).

Most Australians crowd into big cities and they do so for good reasons: more and better-paying jobs, plus better services, both public and private. They put up with the drawbacks of city living: much higher housing costs, unpleasant commuting, congestion, tar and cement, and less feeling of community.

Country people prefer living in the regions for the opposite sets of reasons. It's a free country and that choice is up to them.