Australia’s Crony Capitalism Inc.

Many of us have a nostalgia for the days, commencing with the Hawke-Keating competition reforms, when there was a phalanx of business people calling for deregulation, privatisation and smaller government. Prior to the 1980s the manufacturing groups were calling for more support against imports, including stopping “dumping” a policy approach that Australia took to global heights. 

Farmers were not too bothered about import protections, which raised their costs, but certainly wanted more subsidies for fertilizers and other grants, while they also spent a great deal of energy keeping out low cost overseas produce like bananas and oranges.

The mining industry, being export-oriented, was alone in seeking smaller government and diminished regulation.  But even they campaigned long and hard to maintain the tax-free status of gold mining (lost in 1988).

Among tertiary organisations, some like the Pharmacy Guild were dedicated to preventing competition.  Others like the Housing Industry Association were keen to protect their small business membership from being unionised (and taxed as employees) but also were first in line for new subsidies for their customers, including low and preferred interest rates and support for “first home owners”; they were not overly concerned about regulations restricting housing land supply, largely because their members had, out of sound business practice, assembled land holdings with building approvals, holdings that would be devalued if land supply were to be deregulated.

Retailer groups were indifferent to trading restrictions, the abolition of which was left to individuals like the small retailer Frank Penhalluriack, being comfortable with state government restraints on new shopping centres (restrictions that were smashed by the Commonwealth government which recognised a profitable opportunity and sold developers surplus land near airports).

Quite suddenly, many of the parochial agendas of business groups in the 1980s and 1990s were overlaid with a philosophy whereby the government was urged to do less other than level the playing field.  It came about as a result of the increased importance of philosopher businessmen like Arvi Parbo and Hugh Morgan of Western Mining, John Ralph of Rio and the Commonwealth Bank, farmer representatives like Ian McLachlan and Don McGauchie and people like Steve Kates, now teaching at RMIT, who was chief economist at the Australian Chamber of Commerce for 24 years.

Though that era may be etched into our psyches, we should recall that it was a mere moment in time during which business lobby groups abandoned their traditional goals of seeking government favours for their constituents.  The default position was previously that of Adam Smith, who famously observed, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Smith went on to say that such a conspiracy could only succeed if protected by government regulation. 

But a key goal of industry organisations (and firms themselves as lobbyists) is to obtain benefits from government. The larger government looms within the economy, the greater the potential to gain such benefits (or to lose out to others who more aggressively promote their interests).

The reform era is now passed and the business lobby has  reverted to pursuit of special interests.

Present policy approaches of major lobby groups

The Business Council of Australia (BCA) is the most influential business association and has about a dozen policy executives.  It is no longer focussed primarily upon deregulation and small government.

A recent policy foray was a call to “future proof” the economy by educational spending — arguing for a Lifelong Skills Account — a subsidy for everyone with the existing educational budget to be re-arranged, but with no indication what items should be downgraded to make room for the new program.

Even during its education policy launch, the BCA managed to tell its audience how Australia is falling behind on energy – not because we are phasing out coal, our lowest-cost source of generation, but because we are not killing it off quickly enough!  Elsewhere it is an unabashed advocate of the risible Finkel proposals, saying “preparatory work to design a Clean Energy Target will help maintain momentum and help all parties understand how it can best be implemented”.

This underlines the fatuity of the BCA’s recent offer to help build a political consensus around the government’s proposed National Energy Guarantee with the plea that the policy represents the best hope for a workable solution to the energy crisis.

The BCA also promotes centralised industrial relations calling for “a dynamic enterprise bargaining system which is underpinned by collaboration between unions, business and workers”.  And it wants a Modern Slavery Act, with a new bureaucracy. Need it be said that this will morph inevitably into a new protectionism against competition that pays “unfair” wages.

Other recent policy initiatives have included a welcome but predictable use of Trump’s tax policies to reinforce a message of lower business taxes in Australia, and anodyne calls for “optimal regulation”, “removal of poor regulation” and an “Australian Supplier Payment Code”, under which businesses commit to fair payment terms for small-business suppliers.

The National Farmers Federation (NFF)

The NFF is now more nuts- and bolts-focussed.  It welcomed the National Landcare Program and the “Smart Farms program” under which government subsidies are offered to help “sustainability”, soil conservation and the like.

It is seeking to enlist the competition authorities to force milk processors to offer higher prices “to family operations who can be at a distinct disadvantage when negotiating with the might and force of large processors”.

NFF warmly welcomed the absurd and doomed proposal for an $8.4 billion inland railway between Brisbane and Melbourne and, rather than attack the environmentalist-inspired seizure of irrigation water from farmers, it is examining ways of mitigating the damage.

Showing little concern for its members’ costs, NFF also supports the forced replacement of coal by renewable power.

The Australian Chamber of Commerce and Industry (ACCI)

With about a dozen policy executive the ACCI attempts to cover a great many areas.  Industrial relations is its traditional bailiwick and it works within the system to limit regulated wage increases and reduce regulations penalising Sunday work etc.

The Chamber seeks to remove the state moratoria on gas exploration and issued a rebuke (the content of which was confined to members) to the Victorian Government for presiding over the closure of the Hazelwood coal generator.  It promotes a politically bipartisan amplification of renewable policies entailed in the Finkel Review, which it misguidedly welcomed as pressing “the reset button on our approach to power supply”.

The Minerals Council of Australia

Even the Minerals Council, with major coal interests and other miners dependent on low cost energy, has treaded gingerly on promoting low cost energy from sources other than low emission generation.  It cloaked its work demonstrating that coal was the cheapest form of electricity supply with a politically correct obeisance to High Energy/Low Emission plant.  That supplication was, however, insufficient to save its Chief Executive, Brendan Pearson, from execution at the hands of BHP, one of the council’s major paymasters, which claims to be taking a principled position against the fossil fuels that are the props to its balance sheet.

Other Sources of Policy Advice

Business group now constitute an unlikely source of policy guidance – and their lack of finance means in any event they have very few resources to develop new approaches.  Then there are trade unions and environmental activists, neither of which can offer anything other than interventions that would force down living standards, and government agencies, the universities and “think tanks”.

Today’s leadership in the reform debates largely stems from one-man-band outfits and their contributors in Quadrant, Catallaxy Files, the Spectator, the Menzies Institute as well as the Bolt Report.

Sadly,  Fairfax Media and government funded institutions like the ABC are still pulling towards greater corporatism and stultifying political correctness.  Much the same goes for most of the work coming out of universities.  The public service, even nowadays Treasury and Productivity Commission, which in the 1980s reform era were leading advocates, have retreated from deregulation to promoting an enlarged role for government.

We can only hope the torchbearers for smaller government advocates prevail. The Trump victory, together with some promising rollbacks in Eastern Europe, offer comfort.

There is however a possibility that the tax and regulatory dependent class has now grown so large that reform involving elimination of waste and reduction of the government take from earned income is an ever-receding prospect.  The futuristic novel The Mandibles portrays a US where the ‘leaners’ require 78% of GDP and form an unassailable voting block that ensures economic decline.

Though government spending in Australia is presently only half that share it is proving impossible to reduce and has, in reality, been growing as a result of regulatory impositions.