In The Great Crash of 2008, my co-authored book with Ross Garnaut, we wrote the following:
Australian Prime Minister Kevin Rudd wrote in an essay in The Monthly:
The time has come, off the back of the current crisis, to proclaim that the great neo-liberal experiment of the past 30 years has failed, that the emperor has no clothes. Neo-liberalism, and the freemarket fundamentalism it has produced, has been revealed as little more than personal greed dressed up as an economic philosophy. And, ironically, it now falls to social democracy to prevent liberal capitalism from cannibalising itself.
Similar sentiments have been articulated by heads ofn government in the United States, the United Kingdom, France and Germany.
Such attitudes are creating a generalised justification for increased government intervention in the economy. This is an environment that encourages rent-seeking behaviour in the corporate sector and soft responses from government. Too-big-to-fail is now a general catchcry that is used by any large employer that has fallen upon hard times. The possibility of business failure and reductions in employment become arguments for exemptions from all manner of regulation that has been applied in the national and international interest. It becomes the basis for sympathetic consideration of all manner of subsidies to individual businesses. It is an organising point for business leaders’ resistance to regulation that doesn’t suit their private interests.
I have been staggered ever since by the pace and depth of the rebound in Australian rent-seeking behaviour, in both business and unions It was as if it was the real and natural state of things lurking just beneath the surface and at its first opportunity leaped from behind the veil. This is the greatest and, ironically, most unexplored problem in the Australian economy.
Today former head of the Productivity Commission Gary Banks raises it at the AFR:
It was not until the Hawke Labor government that the old regime began to be dismantled. Capital controls were loosened, tariffs cut, public utility monopolies exposed to competition and anti-competitive regulations systematically reviewed and (mostly) removed. Workplaces became less hidebound by centralised prescription and, by the 1990s, innovation had blossomed and productivity surged.
Innovation has become the sacred cow of industry policy, as though it should be sufficient to invoke it to justify any form or amount of government support, even where it merely props up production. When combined with perceived environmental benefits, the mixture is a potent one indeed. The largest private beneficiary of this juxtaposition of public interest rationales is the carbon abatement industry. On the last count, there were more than 200 different programs to support it Australia wide. And the transfers now dominate most other categories of assistance, amounting to nearly $2 billion at the Commonwealth level in 2011-12.
…auto manufacturers were receiving substantial subsidies for innovation and “adjustment” in place of their former tariff protection. However, he would be concerned at the lack of transparency around the public’s “co-investment”.
Banks goes on to blame the pressures of the GFC and mining boom for the return of rent-seeking. But it is so much more. Like other nations around the world, both communist and democratic, the rise of the rent-seekers is driven by globalisation itself. In every sector of the Australian economy we have an effective duopoly or oligopoly at work. These have arisen as global pressures, practices, capital and ideologies have concentrated power in every sector.
It’s not just an Australian problem, though we are better at it than most. It is rife in financialised Western markets, both in banks and in bloated property sectors. It is equally strong in emerging market industrial sectors, which thrive on development models gone wrong and the poor transparency of malformed states.
As industrial power swings from West to East, politicians on both sides do all in their power to grasp and retard the process of global competition. And within this struggle, everywhere you look, a global class of super-oligarchs marauds across every country, finely tuned missiles homing in on the rent. What can be done about that?
Banks is right. Only clear policy process and costings and can prevent the further spread of rent-seeking. But the challenges are greater than ever and there is so little awareness of the issue because the media’s dying business model has itself been co-opted by vested interests. As we head into an election with a Government that has endorsed the Nanny State and an Opposition with no costings as well as policy that favours big interests in the NBN, tax and carbon abatement, the prospects for rent-seekers are brighter than ever.
