A question for you: how to combat privilege?
As economists well know, we are all rent seekers who try to secure more and more privileges for ourselves and our families, be it monopoly rights (such as currently legally given to medical specialists or local pharmacies), over-pricing for our goods (such as many of the medicines under the Pharmaceutical benefit scheme), preferential access to legal exemptions (such as enjoyed by the bigger property developers when it concerns exemptions to building restrictions), or other advantages that do not accrue from our abilities but from political favours.
The search for more privilege is normal but, in order to have a healthy society, so must there be a perennial fight against it for otherwise the privileged end up lording over the rest who just have to grin and bear their inferior status. And if any profession is tasked with thinking about how to tackle privilege, it is economists. It is one of the good things we do.
The big success in recent decades in the fight against privilege in Australia was the scaling back of import barriers under the Hawke-Keating years. Since then it would be fair to say only the occasional privilege has been brought down, such as the Telstra monopoly that has been challenged by other mobile phones providers.
Truly big scalps have however not tumbled since the 90s, though I regard the proposed mining tax as a valiant attempt to grab some of the rents of Australia’s minerals that were predominantly flowing to overseas share-holders. That attempt at tackling a privilege unfortunately turned into its complete opposite as the Rudd/Gillard government, facing a barrage of attack adds from essentially foreign-owned mining companies, ended up directly negotiating with the three big mining companies at which point it agreed to the cooptation of the commonwealth in protecting the privileges of the mining industry by having the federal government compensate that industry for tax increases by the states. Through that humiliating deal, the commonwealth is now essentially the guard-dog of the mining industry’s share-holders. It is a new privilege costing Australians billions per year. Without this new privilege, I doubt the Commonwealth or the States would have been in deficit.
Apart from this expensive new mining privilege, several other new ones have been granted in recent decades, such as increased compulsory superannuation which created a fixed market for high-cost financial institutions that did not have to contest their clients (though recent reforms are making them more contestable), banana import bans, the take-over of semi-public institutions by overpaid bureaucrats, over-subsidised medicines, differential costs of government deposit guarantees across financial institutions (which was probably instrumental in killing off many of the smaller financial players), and the National Broadbank Network. All have involved major government decisions where the nitty-gritty favours particular groups at the expense of the whole. Slowly, the arteries of Australian economic life are seeing the build-up again of privileged positions.
Part of the current situation is that the privileged have well-organised interest groups with slick media operations that directly target ministers, research outfits, and public opinion. As a reaction to this, ministers and other politicians are now in perennial media-combat mode, by necessity surrounding themselves with media-savvy staffers who vet policies for spin-value and even come up with policy on-the-hoof that fit political storylines. Complaints of the Business Council of Australia (who claims the tendency of having policy decided upon by media-savvy but policy-ignorant staffer costs Australia 20 billion) and others (such as Terry Morgan) against this reality fall on deaf ears as the political need to first and foremost fight a continual media campaign remains undiminished. The role of the civil service to think critically and hold its own against this tide has been eroded by the demise of its own research arms, probably benefiting the privileged at the expense of the unprivileged.
In this first of a series I want to raise the question of how the self-cleansing capacity of Australia can be increased. For certain, Australia already has many dedicated institutions to counteract or expose privilege, including the ACCC, the CMC, Ombudsmen, the Productivity Commission, and an independent press which, despite what the cynical say, does now and then bring forth editors and journos trying to tackle the positions of the privileged.
Still, the good guys don’t seem to be winning big off late and the question is what concretely can be done to increase the self-cleansing capacity of Australia, either in terms of legislation, new statutory bodies, academic research, or indeed the general blogosphere and its associated hordes of philanthropic citizen journalists. In future posts I intend to discuss the pros and cons of the various ideas.
So please let me know in the discussion thread which changes in privileges you have seen in the last few years and how you propose privilege in Australia can be more successfully reduced.