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The Premise

Now Team Cottus please don't take this article personally. It is not directed to you but was inspired by you, if you would like to take that compliment. But I am going go repeat my comment in Cottus' campaign article and expand on the flawed system of weapons for work that so many Government Funded Companies are using to supply their military.

Cottus' article state😛

"We shift towards a "Work For Weapons" policy. Truly committed soldiers will benefit from bonus weapons provided they work at one of our new proposed Q1 Weapon GFCs. The goal is naturally to source 10 soldiers, and fully stock them with 6 weapons a day. This, of course, is a long-term goal and in the meantime these soldiers will still get more weapons than soldiers working in the private sector (ie a skill 4.6 produces 4 weapons daily).

Is this cheaper than buying off the market? Absolutely. If we pay workers in accordance with their skill (skill 4 = $4, skill 5 = $5, etc), then let's take 10 skill 4.6 workers. A daily cost of $128, producing 40 weapons. That's $3.20 per weapon! Land or Construction skilled? No problem - work for our existing Q1 Iron, or Q5 Hospital GFC (higher wage for Q5 workers, of course)."

My Response

In Cottus' article I commente😛

"One question in relation to your Weapons for Work policy: if a skill 4 worker receives $4 + 6 Q1 weapons then their effective salary will be $ 40AUD/day given current rates for Q1s.

How does this make your proposal a cheaper and more efficient way of producing weapons than simply buying then from the market? If the cost of labour is priced properly then weapons will be costing closer to $12 per unit to manufacture given the real cost of labour is double what the market is currently offering."

The simple fundamental issue which cannot be escaped is that the market determines how much goods are worth. So when paying a worker with goods, they are being paid the equivalent of the currency value of those goods. The GFC could list those goods on the marketplace at the lowest price and instantly turn the goods into currency. So when a worker is paid 6 Q1 weapons per day + $1 per skill, a level 4 works is receiving $4 wages + 6 x $6 (approx) weapons or a wage of $40 per day.

The highest rate for level 4 manufacturing presently is $11 per day, so you do the math. With a labour input almost 4 times the private sector, how much is it really costing the government to manufacture weapons.

The Reasoning

Now the government has responded from time to time by saying that GFCs are needed to stockpile weapons. (For those who do not know, orgs and people can generally only store 20 items but a company manufacturing such goods can stockpile 1000 items in their inventory. This is very handy in times of war when prices on the free market can spike as supply becomes scarce.)

Even more wasteful is the running of an Australian iron company in a medium region. This makes absolutely no sense as by simple game mechanics medium regions will always be less productive and therefore more wasteful than if the iron had been bought on the open market from a high region exporter. This is just gross government waste and must be stopped immediately.

The government sometimes responds by saying it costs the government nothing because money is printed at a very cheap price by the eAus government. Well then print that money and buy a cheaper product! Don't waste it on a medium iron company! We have many allies with high iron regions who want our diamonds, let's share our wealth between us and trade.

The Alternative

The alternative to Government Funded Companies is simple: contracts between the Government and private companies to stockpile goods. Using Q1 weapons as an example the government can decide that it wishes to amass a particular quantity of guns by a specific date - let's use 1000 guns as an example. Assuming an average market price of $6 the government could put out to tender contracts for 200 guns. And then take the 5 lowest contracts. It is essential to split up the suppliers to reduce their individual exposure to market fluctuations and the government's risk of GM failure.

Due to the reliable flow of government demand, the General Manager (GM) can plan ahead buying raw materials and ramping up to 10 workers for maximum productivity. If in the example the GM manages an average unit cost of $5.50 then excellent this is profit. If the GM is disorganised then they will make a loss. The government would pay half the contract up front and the rest on completion, or some other stage arrangement depending on the size of the contract. The point is that there is zero risk to the government and none of the headaches of running a business.

GMs will tender competitively for these guaranteed sales and bids may fall to $5.90, $5.80 or even $5.70 depending on how badly GMs want the business. This saves the government even more money.

The great thing about this method is that the government needs no subsidy, they are buying direct from the free market at market-based prices and the Cabinet can stick to doing what they do best (which is stuffing up the economy for business and having eLunches). In return all workers will have jobs with private manufacturers at real market-based rates. Everything the government does in propping up these GFCs is indirectly distorting both market prices for goods and labour. They just don't realise it.

So please don't be offended Cottus. This is not a personal attack on you, it's just that I can't stand this insidious myth of the all-powerful government. The government is not all powerful and generally speaking whenever it is involved things don't turn to gold - they turn to poop!

Get rid of all GFCs and use a market-based solution to supply our government. This way we can grow our economy, our tax base and employment for everyone.

Infin
Senator for Queensland