(Image: Private Media/Mitchell Squire)

The crisis engulfing Melbourne’s Crown casino and the government of Daniel Andrews is now the biggest corruption scandal of recent years — and yet again demonstrates how political donations and influence-peddling become vehicles for profoundly damaging distortions of public policy.

Crown is playing out as a carbon copy of the banking scandals of last decade at the Commonwealth level — the generous donations, the employment of former staffers and politicians, the nobbled, underfunded regulator, the politicians happy to turn a blind eye, the ruined lives and the facilitation of organised crime.

The only novel twist is that Crown was also dudding the Victorian government of tax revenue, and that its pledges of being a changed organisation with a better culture have been shown to be hollow within months of it being made to face the Bergin inquiry in NSW.

On Monday Steve Cannane on Four Corners forensically showed how weak the Victorian Commission for Gambling and Liquor Regulation was in the face of ongoing criminality at Crown — a regulator that, as Crikey revealed last week, had faced funding cuts by the Andrews government even in the face of Victorian auditor-general reports that its regulation of Crown was poor.

Four Corners also reported that: “Three former Labor ministers … believe that Daniel Andrews was too close to Crown. One said money laundering was not properly discussed at cabinet level, and that the premier had a history of shutting down conversations relating to gambling policy or Crown casino. Another senior Labor figure said it was well known in the party room that you don’t upset the Packers or Crown, that you always have to keep them sweet.”

Andrews denies the claims, but his only defence is that he finally called a royal commission in February — more than 18 months after Nine newspapers exposed Crown’s links with organised crime, and weeks after the Bergin inquiry found Crown unsuitable to hold a casino licence in Sydney. And even then Andrews omitted the performance of the regulator from the terms of reference — akin to Prime Minister Scott Morrison telling Kenneth Hayne the banking royal commission couldn’t look at the performance of ASIC or APRA.

Political donations and the employment of politically connected executives have bought a cowed, underresourced regulator and a political protection racket for a powerful corporation. It’s corruption of exactly the same kind displayed by the Liberal Party in Canberra when it ran a protection racket for the big banks that enabled money laundering, ruined lives and industrial-scale rip-offs. And Andrews and the Victorian Labor Party are right at the centre of it.

Labor supporters will argue, correctly, that if the Victorian Liberals were in office the same corruption would occur. Indeed, Crown has donated more to that party than Labor. But that simply illustrates how political donations, and the employment of politically connected people, are the systemic issue.

The mistake around political donations is to see them as directly transactional: X donation on a certain date being provided in exchange for Y political favour. As Paul Frijters and Cameron Murray argue in Games of Mates, donations aren’t transactional in that way, but instead act as investments, or signals between parties with shared interests about the indirect exchange of favours within a group.

Donations, particularly large donations that ensure you have direct contact with decision-makers, buy a spot in the club of like-minded interests, with a shared assumption that such investments will be repaid in time, even if not directly, and even if not always exactly as hoped. Employing former staffers, former bureaucrats and former politicians is another form of investment, because it signals to current decision-makers that they’ll be rewarded in the future — again without any direct transaction.

Regulating this kind of soft corruption is enormously hard, but ending political donations, and more tightly regulating the post-public life employment of public officials, will limit two of the most obvious mechanisms by which favours are exchanged.

Murray argues elsewhere that the only truly effective reform is to remove the incentives to establish such structures in the first place, either by removing the windfalls available to those who secure regulatory favour, or by introducing genuinely independent decision-makers rather than elected officials.

Without such reforms — with only the kneejerk regulatory reaction designed to placate the political crisis brought on by a corporation exploiting its power too blatantly — we can be sure there will be future Andrews and future Crowns accommodating one another. The system is structured that way.