Not as simple as ABC

In a particularly turbulent week that saw the first African American ever to be elected to the presidency of the USA, the Bali bombers finally face the firing squad and the global economy teeter on the edge of a full scale world-wide depression, it was paradoxically the imminent collapse of a chain of privately run child care centres, right here in Australia, that had the most potential to impact upon the daily lives of community members.

Unquestionably, the need to bring a second income into the traditional family group has been an essential component  of how we live our modern day lives for at least twenty years in this, and most other developed western countries, and ready access to suitable child care facilities has been an essential corollary to this development.

As a consequence the looming demise of a company which provides day care facilities  for about 120,000 children throughout the country (1,200 centres in Australia and New Zealand) is most concerning to thousands of double income families already struggling to make ends meet.

Of course the $22m federal injection will stave off judgement day, until at least 31 December, and finding non-profit organisations ready and willing to take over the profitable parts of the operation should not be too difficult – even for the usually inept insolvency types (when did you last see a company successfully trade out of its difficulties under administration/receivership?)

But the real challenge facing the government and receivers will be to find alternative operators for the 430 or so loss making ABC Learning Centres already identified. Where these struggling centres are actually located has not been released, but with charges of $55 per day and an 88 per cent occupancy rate required to ensure profitability it seems likely they will be in the outer suburbs or regions with lower paying jobs.

The politics of simply letting ABC crumble under the ravages of a so-called free market is particularly difficult since the majority of young families, who are already struggling with mortgage repayments and the constantly escalating cost of living, actually support the new Rudd government and as a consequence the economic and social cost, not to mention political cost, of abandoning this influential group would seem far too high to seriously contemplate.

Some pundits may claim the rise and fall of ABC demonstrates the failure of its unique hybrid ‘community/free enterprise’ type business model – 40 per cent of ABC’s earnings were funded by taxpayers, but it is in fact much more likely to be the natural consequence of over-exuberance in an unregulated post-Keynesian economic world – Keynes's macroeconomic theories were a response to mass unemployment in 1920s Britain and in 1930s America.  See Wikipedia: http://en.wikipedia.org/wiki/Keynesian_economics

The ABC business model does however raise difficult governance issues and serious questions regarding the appropriate role, profit-making organisations should play in providing community services at a time when most levels of government are actively cutting back in a host of traditionally non-profit areas e.g. hospitals, schooling,  power generation, police and traffic services and the provision of transport infrastructure spring quickly to mind.

I believe the lesson to be learned from all this is that ABC expanded so excessively primarily because it filled a vacuum created by successive governments unwilling to fund much needed community based child care facilities – and that’s a basic law of supply and demand!