It looks as though, barring a collapse of the new minority Labor government, Australians are going to have high speed internet via the National Broadband Network (NBN). To secure the support of two independents, Julia Gillard literally committed billions of dollars to build the fibre-optic equivalent of 'roads to nowhere': broadband for rural Australia. This will likely cost Australians over $2,000 each before the monthly access and home installation fees are even considered.

Now, most of the arguments for the NBN are that this is a 'once in a lifetime' opportunity that we have to take; the future productivity gains that Australia will enjoy will propel us to the forefront of global research and development. They say that the private sector is too short sighted to make the investment themselves and that you need government to take the initiative on these sorts of massive infrastructure upgrades. But this argument ignores why private sector broadband infrastructure investment might be lacking - government created costs such as regulation, anti-trust laws, legal monopolies and policy uncertainty, then of course normal business risks such as viable returns, potential uptake, alternatives, availability of more economical technology and so on. For the sake of brevity, let's ignore those for now and instead take a look the benefits of government undertaking this investment on behalf of Australians.

We know that the only way to create real wealth is through production. Will the NBN aid in increasing production? Quite possibly. Government investment (which is what the NBN is classified as so as to avoid showing up in the deficit) can aid in the production of more goods. Faster internet will no doubt help certain businesses and enhance research capabilities. But to quote Mencken, government can help boost production in the same way a doctor can "...claim the right, every time he is called in to prescribe for a bellyache or a ringing in the ears, to raid the family silver, use the family tooth-brushes, and execute the droit de seigneur upon the housemaid."

Government investment, while possibly having some benefits, mostly results in the destruction of wealth and capital. All investment undertaken by the government could be performed more cheaply and efficiently by individual firms. If they do not undertake the investment - excluding the government-created barriers mentioned before - it is because the private sector uses market prices to determine which projects need to be undertaken and when instead of basing decisions on politics and bureaucratic decree.

The NBN is going to create another state-sponsored monopolistic utility insulated from competition through law along with the usual mountain of bureaucratic regulation of pricing structures and investment options, thereby greatly limiting the freedom of markets. Consumers will lose the ability to choose their provider or type of service and the telecommunication companies will lose their freedom to determine what to charge and what infrastructure to invest in (then again, they do not exactly have complete freedom in this regard today!).

The broadband access in rural, low-density areas that Julia Gillard has promised the independents is in no way profitable and will waste billions of dollars to subsidise even more urban sprawl (one wonders what the pattern of land use would be today if such "universal" subsidies - free roads, water, electricity, broadband and so on - never existed?). I can only imagine what the true cost per household for this rural broadband network is going to be! The poor taxpayer is going to be slugged yet again for another scheme that likely adds little productive value when compared to something far cheaper like satellite internet for rural communities. The rhetoric used to justify the NBN, both by the government and the independents, sounds remarkably similar to the pronouncements the Soviet planners used to make to justify their fancy paved roads through Siberia; and boy did those roads pay dividends for the average Russian!

This is just another example of government providing monopoly grants in exchange for "universal service," subsidising rural and residential customers at the expense of urban and business users. I suppose as soon as you artificially concoct rights like that everyone has an invented right to services regardless of location then broadband was the next inevitable step. I wonder what will be next, the right to free universal dental care and dental clinics out in the bush? Don't worry, the Greens are on that one.

ADDENDUM

I should probably add that the Liberal party alternative is hardly better. Malcolm Turnbull, in NBN - The Wrong Policy for Australia, highlights the problems that all governments have when determining the appropriate policies. He makes some valid points that are similar to the ones I have made above, such as it is too expensive, it will raise costs for consumers, value-add will not be as much as the investment cost and the fact that Canberra cannot run an efficient business (look at any public utility for evidence of this one!).

Those reasons are all well and good, but it is one of the final points, where Malcolm discusses opportunity cost, that demonstrates what Ludwig von Mises pointed out decades ago: socialists (government) cannot calculate and therefore cannot allocate resources optimally - they are merely "...groping in the dark."

Malcolm argues that "...less public capital will be available for other better understood and equally or more pressing areas: new and improved hospitals and schools, upgrades and extensions to roads and railways, or better public transport." Malcolm is correct, but how does he know what the appropriate allocation of capital should be? It is simple: he does not. At best it would be an educated guess, the result of some taxpayer-funded 'study' that highlights congestion on certain roads or a lack of beds in certain hospitals. At worst, his arbitrary allocation of capital would under-perform the NBN.

What we need is to cease all of this time-consuming, pointless debate on how the public's money should be spent, from whom it should be taken from and to whom it should go and instead give the power back to individuals acting in their own self-interest to satisfy their own ends. Hayek once said that "...it is a dispute as to whether planning is to be done centrally, by one authority for the whole economic system, or is to be divided among many individuals." We need to move away from centralised bureaucracy where decision-making is virtually arbitrary and move towards a system of profit and loss, of monetary calculation, where the demands of consumers are what determines which investments are undertaken and whose functioning is not sabotaged by government interference!