Saturday 28th of December 2024
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whither democracy .....

whither democracy ....

Like most, I believe in democracy. But I also believe in capitalism, and though the two have usually been seen in the West as a good fit, of late I'm having doubts.

Every society has to use some system for organising production and consumption, and I know of none better than leaving it largely to private enterprise.

For the most part, markets work well in bringing buyers and sellers together and satisfying their respective needs. Markets' reliance on people pursuing their own interests does a good job in encouraging efficiency and innovation.

The funny thing is, when capitalism is working well it's the capitalists themselves who get taken advantage of. They keep coming up with new ways of making a fortune - railways, electricity, motor cars, the telephone, radio, television, the internet - but in the end competition causes most of the start-up companies to go broke and leaves most of the benefit not with the capitalists but their customers. It comes in the form of access to affordable transport, power, entertainment or communication.

Of course, as the global financial crisis so painfully reminded us, markets are far from perfect and it's folly to leave them inadequately regulated. Markets are actually a creation of government, and governments have to continuously supervise them to ensure they don't run off the rails.

It's this need for continuous government involvement that can cause problems. Can we be sure government intervention is always aimed at benefiting customers rather than making life easier for the few big companies that dominate many of our markets?

Then there's democracy. What if it becomes too easy for capitalists to take advantage of the institutions of democracy to get the rules of the game bent in their favour? Of all the columns I wrote last year, the one that drew the biggest reaction was called ''The four business gangs that run America'', quoting a book by Professor Jeffery Sachs of Columbia University. Sachs wrote that four key sectors of US business exemplified the takeover of political power in America by the ''corporatocracy'': the military-industrial complex, the Wall Street-Washington complex, the Big Oil-transport-military complex and the healthcare industry.

I ended the column by saying that ''fortunately, things aren't nearly so bad in Australia''. It's true, they're not. But, in a paper to be issued on Wednesday, Corporate Power In Australia by Dr Richard Denniss and David Richardson, of the Australia Institute, we're reminded that things here are far from ideal.

The authors argue that ''big business exerts influence through campaign contributions, influence over university funding, sponsorship of think tanks and in other ways''.

The four most disproportionately influential industries in Australia, they say, are superannuation, banking, mining and gambling.

Employers in Australia are required by law to remove 9 per cent of employees' pre-tax wages and deposit it in a superannuation account the employees can't touch until they retire. The industry has now persuaded the Labor government to gradually increase this to 12 per cent.

Thus the government has compelled almost all employees to become the customers of a particular industry.

The average management fee paid by Australians with a retail super fund is about 2 per cent of their fund balance each year.

So someone with a balance of $100,000 is paying a fee of about $2000 a year, or nearly $40 a week. This is more than the average Australian pays for electricity. After the compulsory contribution rate is raised to 12 per cent, these annual fees will have increased by a third.

To be fair, the government is working to oblige the super industry to give its captive customers a better deal. But it is encountering - and yielding to - much push-back from the industry.

According to the authors, our big four banks are among the eight most profitable banks in the world, with the International Monetary Fund saying we have the world's most profitable banking system.

Over the years, the big four have been allowed to acquire or merge with 15 of their rivals, with the authorities continuing to insist the industry is competitive.

Since the global financial crisis, the big four's market share has risen from 74 per cent to 83 per cent, the authors say.

Both sides of politics profess to be highly disapproving when the banks seek to protect their profit margins by failing to pass on all of a cut in the official interest rate.

But the pollies rarely match their words with deeds. Their efforts to increase competition are quite timid and some measures actually make life easier for the banks.

Last year the mining industry accounted for more than a fifth of all the profit made in Australia, even though it had a much smaller share of the economy. This was mainly because the royalties charged by the state governments failed to capture enough of the market value of the minerals the largely foreign-owned miners were being permitted to extract.

When the Rudd government tried to correct this with a resource super profits tax, the industry set out to bring about its electoral defeat, Tony Abbott saw his chance and sided with the industry, and Julia Gillard backed off rapidly, settling for a new tax that seems to be raising little revenue.

Gambling is a small industry, but incredibly lucrative, partly because it's so tightly regulated. Whether it's the way the O'Farrell government is accommodating James Packer's ambition to expand in Sydney or the way Gillard welched on a written agreement with Andrew Wilkie under pressure from the licensed clubs, the industry's political power is apparent.

When politicians worry more about pleasing certain industries than about serving the people who elect them, we have a problem.

The Four Industries That Rule Australia

 

why Gillard's contest will be surreal .....

Ignore for a moment the 'chaos' enveloping the Gillard government. This is hard to do because it has been embraced with gleeful commitment by the Canberra press gallery and by the ever-multiplying number of commentators who are in a ceaseless life and death struggle with each other to be heard.

But if we can for a moment ignore this avalanche – with some honourable exceptions – of hysterical reporting and commentating about not much at all, what really are the issues of substance that are contested between Labor and the Coalition and that go to the future of the country and yes, even influence what sort of country Australia might be a decade from now?

In their National Press Club speeches last week, what exactly did Julia Gillard and Tony Abbott have to say about these issues of substance? In the main, whatever they had to say was buried almost immediately by Gillard’s announcement of the election date, which the journalists and those shouting commentators treated as an announcement akin to a declaration of war.

Gillard did say something about the need for major structural change – code for tax increases and cuts to middle class welfare – in order to fund the Gonski education reforms and the National Disability Insurance Scheme. But who really cares about that when there’s an election date to report!

Tony Abbott, well Tony Abbott was repeating his mantra about stopping the boats and repealing the mining tax and the carbon tax when he was saved from total inanity by Gillard’s election announcement, and by the arrest of Craig Thomson which came in the middle of Abbott’s Press Club speech.

When Craig Thomson was charged with those fraud offences, chaos descended like a blanket of fog on a cold Canberra morning – on the political class and on journalists – and we have been in that fog ever since, through the announcement by two senior ministers that they will retire and the Newspoll on Monday that started a whole new round of speculation about a Rudd comeback.

This is speculation that is journalist driven basically, because journalists are prepared to report – anonymously of course – every wild and often hysterical outburst by Labor people, without ever asking these people to put their names to this stuff so that we poor punters can judge where they are coming from and why they might be saying these things.

It seems to me that journalists have become sort of counsellors for psychologically stressed MPs who need a sympathetic ear and who feel better when they have unburdened themselves of their nightmares. Whether journalists should play this game is questionable.

Now back to the issues of substance, or rather the lack of them and the likelihood that chaos will remain the leitmotif of the coverage during the next eight months – most likely the final eight months – of the Gillard government.

The fact is that compared with other first world countries – the US, Britain, most of Europe, but especially Italy, Spain and Greece – Australian politics is about not much at all. Fundamentally, this is because Australia sailed unscathed through the GFC and the subsequent deep recession (in some cases depression) that afflicted most of the developed world.

As a consequence, Australians have lived in a sort of bubble for almost five years. It is a bubble which has sheltered us from, and allowed us to ignore, the devastation wrought by prolonged recession.

There are deep divisions in American politics, with the Republican Party increasingly the captive of Tea Party fundamentalists who are unwilling to accept the legitimacy of Barack Obama’s presidency. There’s the rise of extremist parties on the left and the right in Europe.

In Italy, Silvio Berlusconi can say that Fascism was not a wholly bad thing and still remain a candidate for prime minister, and a neo-Nazi party in Greece, protected by the police, can have its uniformed thugs beat up immigrants with impunity. In some of the developed world, faith in liberal democracy is shaky, wavering, the future bleak and challenging.

None of this has had much impact on Australia.

Australia has been shielded from all this. And yet the September 14 election will essentially be decided by people who feel stressed, despondent about the future, struggle to cope with cost of living pressure, and are worried about the influx of asylum seekers – people who, in the main, live in Western Sydney and suburban Brisbane.

Beyond the slogans that both Gillard and Abbott often employ as a substitute for a political language that is alive and that reflects real thought and real feelings, Gillard and Abbott are in fundamental agreement about this. They both said as much in their Press Club speeches.

But given that in reality, there is little that any government can do that would, for instance, shelter Australia from the consequences of a world awash with refugees, and given that the empirical evidence is that most people, including those people who feel they are not coping with cost of living rises are actually better off than they were a decade ago, there is inevitably a sort of fundamental unreality about Australian politics.

And on issues of substance, there really is not much difference between the two sides. The differences on the deficit for instance are marginal and inconsequential. There are few small government fundamentalists in the Coalition and Abbott certainly isn’t one of them. And there is now no daylight between the Gillard government’s policies on asylum seekers and Abbott’s Coalition.

Yes, Abbott has promised to abolish both the mining tax and the carbon tax but the mining tax is increasingly irrelevant as the mining boom winds down and the carbon tax, like the GST before it, is now so widely accepted that it’s hard to believe that Abbott will go through the political pain – which is likely to include a double dissolution election soon after the election in September – to repeal it.

There may be differences between Gillard and Abbott on the Gonski education reforms, but even that is not clear and Abbott has signalled that he is in favour of the NDIS and in government, would support the pilot programs that will be underway in New South Wales and Victoria.

In the one area where there is potentially a significant and substantial difference between the two sides, on labour market reform, Tony Abbott has made it clear that he is most definitely not on the side of those in the Liberal party who reckon significant reform – indeed a return to some form of Work Choices – is fundamental to the health of the Australian economy.

For all these reasons and also because chaos and conflict are so journalistically attractive, the way this election year has started is likely to be the way it continues right up to election day on September 14.

Why Gillard's Contest Will Be Surreal