Gittins: Rent-seeking golden age is ending

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From Ross Gittins today:

The collapse of the “neoliberal consensus” is as apparent in Oz as it is in Trump’s America and Brexitting Britain, but our big-business people are taking a while to twig that their power to influence government policy has waned.

Their trouble is the way the era of micro-economic reform initiated by the Hawke-Keating government in the 1980s eventually degenerated into “bizonomics” – the pseudo-economic belief that what’s good for big business is good for the economy.

Part of this is the belief that when you privatise a government-owned business, or outsource the delivery of government services to for-profit providers – when you move economic assets and activity from the “public” column to the “private” column – you’ve self-evidently raised economic efficiency and wellbeing.

…as has been well demonstrated by Malcolm Turnbull’s refusal to increase the goods and services tax, his inability to cut the company tax rate for big business, and the public’s overwhelming disapproval of the Fair Work Commission’s decision to cut Sunday penalty rates (complete with the Coalition’s attempt to deny paternity of the bastard child), those days are ending.

These days, it’s not just leftie troublemakers who doubt that benefits going direct to big business will trickle down to the rest of us, it’s every punter in the street.

Another element of bizonomics is governments in many anglophone countries maintaining the facade, but not the substance, of business regulation.

They tell the public it’s protected by laws governing treatment of consumers, employees, shareholders, taxpayers and others, but then rob the regulatory agencies – in our case the ACCC, Fair Work Ombudsman, ASIC and the Tax Office – of the resources they need to adequately enforce the laws they administer.

In this game of nudging and winking, it didn’t take long for business to realise that, its chances of apprehension being tiny, obeying any law it found standing in the way of higher profits was now optional.

…This is what explains the plethora of business law-breaking being uncovered by Fairfax’s Adele Ferguson and other investigative journalists. What’s notable is the way the business lobby groups have failed to condemn corporate lawbreaking.

It’s true that we have seen a shift in some areas of policy-making. It began with Labor’s negative gearing reforms which saved Bill Shorten’s leadership. It’s been consolidated a little with Malcolm’ Turnbull’s swing to the centre, which included a sensible move to regulate gas exports and the bank levy. The RBA and APRA have also swung away from an allergy towards sensible regulation. ASIC and the ACCC likewise have rediscovered the public good though remain pretty powerless.

But whether policy is past its rent-seeking nadir is still up for grabs. Gitto’s piece is a welcome tonic to the relentless decline of public goods we chronicle at MB. But it is also ironic because Gitto won’t venture into the policy territory where rent-seeking is still rife and in total control of the vast bulk of the economy. That is housing and population policy.

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Gittins has for a long time argued for sustainable population for Australia (for example, see here, here, and here). But he has stopped mentioning it at all in the past two years at the very time that the issue has become most destructive. His employer benefits directly from this odd oversight, to the detriment of the wider public good represented in declining measures of living standards that include wages, house prices and infrastructure. Gittins rightly praises Adele Ferguson’s pointed work in exposing visa corruption but, let’s face it, he is doing so while abandoning her to fight it alone.

Perhaps this is Paulinephobia, the fear of association with One Nation, or maybe it’s some cynical support for Domain. Either way, the rent-seeking economy won’t pass its nadir until Mr Gittins finds the cojones to address his own shortcomings.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.