Aerar

A commonplace of german politics

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Fair but hard

26 October, 2008 (14:46) | finance | By: Aerar

In Germany the State and the public utilities related to it are in charge of providing infrastructure and services. This is funded mainly by the money derived from taxes. Even though there might be different opinions ofthe usefulness of one or the other service it is agreed that in general they are useful for the citizens as they provide services which due to sovereign or economic reasons can not be provided by private companies. The national defence, public administration and providing a nationwide infrastructure would be such services.

All those services can be used directly or indirectly by every citizen and increase the ability of a country to act and to develop economic power. It does not matter if a single service is used more or less by a single person. But the mentality of the Germans seems to include a feeling of correctness which urges to have a person using something (even public) to pay for it.

This may make sense in those occasions the use of a subsidized service would lead to high extra costs. By charging a fee abuse can be minimized to keep useless costs as small as possible. But fees are counterproductive if they restrict the useful and wanted use of a resource, which has been provided anyway and which is payed for by subsidization.

Therefore fees for subsidized services should be avoided whereever it is possible as it decreases the use which is wanted on the other hand. By having a smaller number of users the positive effect of a measure will be reduced and the cost per user will increase. The charge of fees also means an extra effort of time and money. In fact such fees only earn a fraction of the actual total cost of a service and often the effort needed to encash fees is about as high as the money earned. In addition fees tend to be a drawback especially for poor people who would be hurt more by a fee. In most cases there are better ways to prohibit abuse than charging fees. Here are some examples where a fee for usage should be disposed:

Education at unversities:

The funding of universities is not done by tuition fees. The charged costs of about 500 Euro per term is just a fraction of the real costs. The rest is subsidized by the community. So in best case tuition fees are serving as a fig leaf for higher-income earners who can hide the subsidization they recieved behind their relatively small share. In the worst case good students with poor economic background will be detered from studying even though the service of universitary education was created and paid by the community to increase the intellectual and economic power of the country. A better measure against misuse would be performance records instead of proofs of financial power as it is not a privilege of lower-income earners to study dispite of lacking intellectual abilities or missing the needs of the economy.

Public Broadcasting:

A basic information with high quality news and cultural information seems not to be profitable. Nevertheless “intellectual broadcasting” is important for the social and cultural development of a country. This will be of profit for everyone as the viewers would spread their gained knowledge to other people as well. In this point it would be worth another discussion whether the public broadcasting in Germany actually fulfils this demands.
In fact almost everyone is watching TV or listening radio regularly. Nevertheless everyone has to deal with the “GEZ” which beside annoying spots against TV pirates produces a huge amount of costs. A real resource consumption by a viewer of a TV show can not actually be named. A costly recording of every user is as the “GEZ” itself useless, expensive and annoying.

Public mass passenger transport:

In most cases mass passenger transport is not profitable and therefore subsidized. Here as well an expensive contigent of ticket machines and ticket inspectors is used to gain some of the costs by the customers. Beside of the costs of the tickets the effort of getting them is making the service less interesting. This is bad as the community profits by every user of this service. As the costs to a good deal lay in providing the infrastructure the costs will not increase proportionally with every passenger. A good and well used mass passenger transport will connect residential areas with the commercial areas increasing the profit of the retail sale. Above that the use of streets can be reduced saving costs in upgrading the infrastructure especially in the city centres.