Your problem is you believe in competition, and more than that I believe in having my cake and eating it too.
Kerry Packer to Paul Keating
The lack of competition in Australia — and the ability of large firms to exploit ever-more concentrated markets to gouge consumers — is finally being taken seriously again, at least among policymakers.
It’s “horse has bolted” stuff. According to a paper on increasing concentration released by Treasury in October 2022, the market share of the top four firms in each industry began rising in 2002 and is now at record highs. But better late than never.
While the debate around how market concentration has helped drive profit-led inflation has progressed in leaps and bounds overseas among think tanks, central banks, academic economists and statistics offices, here it has consisted of mainstream economists, commentators and the Reserve Bank effectively sticking their fingers in their ears and yelling that non-mining profits haven’t increased so there’s no profit-led inflation — an argument Professor Allan Fels debunked in his analysis of profit-led inflation for the ACTU.
Competition has always been the poor cousin of economic policymaking in the neoliberal era. Competition is the fatal flaw in the otherwise perfect theory of neoliberal economic reform. Neoliberalism espouses competition for all — workers, corporations, nations. But corporations, meant to be at the forefront of competition, reflexively sought, successfully, to reduce competition for themselves — turning market reform into what I’ve called the forced transfer of certainty from workers to corporations.
Mainstream economists have struggled with this gap between theory and reality. Many of them saw the proliferation of corporate mergers that occurred in the wake of deregulation in the 1980s as a good thing — mergers and the acquisition of smaller firms by larger firms generated economies of scale and greater efficiency, to the benefit of consumers, they said — even when many of these benefits never materialised or went straight into profits, not consumers. In Australia, the problem is especially bad because we’re such a large country with such a small population, with more industries tending towards natural monopoly or oligopoly.
Moreover, there are plenty of people invested in greater concentration. The Financial Review regards itself as the watchdog of neoliberal orthodoxy, but it also champions mergers and acquisitions because they generate copy, and that copy is avidly read by the entire industry of dealmakers, managers and ticket clippers that feed off mergers. This is a whole constituency, and newspaper, invested in ever-growing levels of market concentration. It’s no surprise the AFR lauded the Australian Competition Tribunal’s rotten decision to overturn the Australian Competition and Consumer Commission (ACCC)’s rejection of the anti-competitive merger of Suncorp and ANZ.
Don’t look to the Reserve Bank for guidance on competition, either. It prefers stability to competition within the banking sector. And don’t look to the wider media to focus too much on the dangers of market concentration. Our media industry is even more concentrated than most other industries — an oligopoly that makes its money from gouging customers and influencing governments.
As with the banking royal commission, it’s only been after years of abuse of market power and rising, palpable anger on the part of voters that politicians have finally decided to do something about concentration, with Labor’s Treasury competition taskforce, mooted reforms of mergers laws, the ACCC probe of supermarkets and, now, a proper investigation into airport slot hoarding. Some of the credit for this goes to Labor’s Andrew Leigh, who has been pointing out the damaging effects of market concentration since his days as an academic economist.
But the only political leader with a consistent interest in and zeal for competition was Paul Keating. Not for nothing did Keating, in accepting a life membership of Labor in 1999, say that one of his key achievements was bringing:
a new word to the Labor lexicon — competition. Competition is our word, not their word. Not the Tories’ word … The great evil of working Australians was inflation. This was not as true of the business community. They always did well from inflation because they were always geared and able to pass on costs. But for ordinary people, inflation ripped away their savings and put enormous mortgages on their backs. And so competition became a goal and a new idea. Part of Australia’s renovation — indeed, our renovation.
It was Keating who not only, as treasurer, drove the overhaul of the Australian economy but who, as prime minister, drove national competition policy, aimed at curbing the market-skewing dominance of government-owned enterprises in service delivery. Hated by the Nationals, it was another of the many reforms that the Coalition at the time opposed.
When Packer — an arch-oligopolist — lashed out at Keating’s fondness for competition, he was channelling what every senior business figure in the country felt: competition was for everyone else, not me. And you can still see the same sentiment today in the recent slimy media releases from the Business Council, warning Labor against changes to merger laws because they would “risk unnecessary economic damage and would reduce Australia’s attractiveness as a place to invest and innovate”.
In fact, market concentration is correlated with poorer productivity performance and lower investment — and greater lobbying by larger corporations.
Between big business, its media cheerleaders and head-in-the-sand economists, there’s a powerful constituency eager to choke off this renewed interest in competition and concentration. Remember the banking royal commission — the banks just waited a few years for the political pressure to come off, and a compliant government began reversing the Hayne reforms. The current versions of Kerry Packer will be hoping for the same outcome.
I’m fairly sure this nation is thoroughly incapable of any worthwhile reform at a scale that matters.
Looking forward to being proved wrong about that one day, but I fear nations, and civilisation, will cease to be things before then.
Propagandists disguised as economists will survive right up to that point, though
It was also Keating who began the watering down of the cross-media ownership laws that have left us with a virtual media duopoly, with all the resultant damage to our public sphere that comes with that.
The other fallacy in the neoliberal dogma that never gets talked about is that deregulation doesn’t inherently lead to more competition, it usually just leads to higher market power for established players.
Would that be the same Keating who said “You can be a queen of the screen or a Prince of print, but you can’t be both”? I doubt you can blame Keating for watering down cross-media ownership laws.
Yes, he allowed conglomeration within media (despite muliptle TV stations labelled 7, 9 or 10, one individual was limited to owning two stations only , and not a whole network, prior to the ’80’s), but you can’t blame him for cross-media ownership which, for example, sees Nine Entertainment owning print, TV and radio outlets.
Good points!
You were right the first time Adam. Keating of course set out to wreck Fairfax – which certainly pleased Kerry Packer – and the half-hearted cross media rules – decades too late – were merely his means to that end. Had we had x-media rules earlier we might not have nurtured the Murdochs into a global force. That said, Keating’s running of media policy from Treasury was only slightly worse than a string of communications ministers before and since. Australian media policy was always neoliberal and its results were a national precursor of the global oligopolies now in big tech. What Keating did here aligned perfectly with the neoliberal comms policies of USA in 1990s that facilitated our current global mess.
Yep. Keating’s hatred of the Fairfaxes blinded him to the media future of the Murdochs. The most disastrous decision of his government except for the privatisation of the Commonwealth Bank.
It was Turnbull who opened the can completely – the same Turnbull who was deposed by the M press, and has been suffering-not-in-silence ever since!
And as well with his destruction of the NBN he turned out a bit of a dill, our Malcolm. The trouble with smart people is they can be incredibly stupid as well.
That was Howard, the man who thought they’d keep him in Kirribilli until he died. The people spoke then, they need to speak now.
Spot on, Howard has given Australia and Australians a generation of misery.
The next test for Government will be the proposed merger of Sigma Healthcare and Chemist Warehouse
https://www.abc.net.au/news/2023-12-11/chemist-warehouse-sigma-healthcare-merger-deal-explained/103213384#
Lots of breathless commentary about creating a “$8.8bn pharmacy group”, but what of the impact on pharmacy prices on poorer Australians, especially given that Chemist Warehouse are one of the few discount pharmacy chains?This merger should and must be BLOCKED.
Andrew Leigh is often underestimated because he is quiet rather than aggressive and doesn’t call attention to himself, but he does some terrific work. He’s been following the shift of risk from private corporations to the public sphere, where private organisations get the benefit, whilst the public takes all the risk and pays the consequences when it goes wrong.
This shift was most obvious to me when John Howard was in power and his brother’s company went broke, with laws suddenly made for the government (ie taxpayers) to compensate the workers thus relieving company directors from that liability. I doubt that anyone was prosecuted for trading whilst not financially sound, nor would there have been any criminal penalties or private lawsuits I suspect, despite clear failures in management and huge costs to taxpayers.
As an Assistant (read Junior) Minister, Andrew Leigh is excluded from Cabinet. That fact is bad enough but the reason why, because he is not a member of any of the Labor factions, is a very big Minus against Albanese’s record card. “We’re going to do things differently” is just so much malarkey. Albanese likes to pretend that he’s not from the mould but his exclusion of Andrew Leigh shows that, take away the shiny new suit and underneath see that nothing has really changed.
Absolutely agree. Andrew Leigh was MP for my electorate until the ACT was entitled to three MPs and he chose to remain in the seat of Fenner while my house was within the seat of Canberra.
He is very diligent, very responsive, does really excellent research and writing and speaks very well. An absolute asset. I also like it that he is unaligned with any ALP faction. Pity his talents are not more appreciated – there’s not exactly a surfeit of talent in the government, even if it is slightly better than its predecessors.
Again, ask why the NSW Right hate him.
Is that the ALP NSW Right that delivered up Eddie Obeid, Joe Tripodi, Tony Kelly and the union bosses that backed them into their positions and kept them there for years? That ALP NSW Right. The mob who now style themselves as ‘Centre Unity’ and navel gaze over questions such as ‘would those within our own industrial ranks who oppose electricity sale advocate the re-nationalisation of Qantas, Telstra and the Commonwealth Bank?’ Answer, Yes, those within their own industrial ranks would re-nationalise those assets in a heartbeat, just ask the TWU. With Australia Post now well down the road toward privatisation (except in name) so far down the road it may as well be privatised, I wonder if the ‘centre unity’ cheerleaders the CWU, have noticed, or still drinking the kool aid and backslapping their own success.
Leigh should have stayed as Professor of Economics at ANU – he might have had more influence than at present!
There is no such thing as “working within the system” anymore.
Too late for regrets!
True. Albanese has been a huge disappointment as a PM in so many areas, not least being the one-sided war on Gaza people where he did a fast about turn because of Biden’s support of the weapons industry – that’s what it amounts to and I think he’s just cut his own throat.
Not quite right. He is not “”Minister Assisting…”, but an “Assistant Minister”, a role previously known as Parliamentary Secretary. The adjective, “assistant”, is the key word.
Yes agreed. ALP factions while useful at times have often acted against the general interest of good government. Andrew Leigh is very good. But the NSW Right hate him for some reason, so he is kept at arms length.
It is not only the NSW Right and the coalition that hate Andrew Leigh. I do as well. He is merely trying to ape Bob Carr with his prolix interminable essays which often have factually incorrect information or reasoning attached to them. He is a windbag and should save his energy for the marathons he runs.
I was amazed by this https://www.theguardian.com/australia-news/2024/feb/22/public-servants-must-do-more-to-manage-conflicts-of-interest-aps-commissioner-tells-top-bureaucrats.
Who is responsible for the public services being in the thrall of the Big 4 and other opportunists? I suggest not public servants, but politicians: their desire to hide spending on public servants by accounting – shifting payroll into other expenses; donors of course; starving the public services of the funds and expertise to do their jobs; and maaates.
And why is it desirable to hide spending on public services? The MSN constantly demonizes public services as it’s a neo-liberal tenet that public is bad, private is good. For whom?
This has been embraced by politicians and public servants as well as business, because they all benefit from it It is only the public that loses out with higher costs, less quality and reduced performance in general. Politicians and senior public servants are able to defer blame when things go wrong, letting them off the hook. They can blame the consultants and they usually do.
Sometimes I think that is the main reason for calling in consultants rather than their expertise, as all too often neither the consultants nor those managing them have the expertise necessary for success. There is a co-dependent relationship there, as the consultants do whatever their told for huge amounts of money, no matter how bad the strategy or decision or policy. Everyone is happy as life is calm and people feel in control with little risk to them if things go wrong. The consultants get their money and their masters get compliance without any pushback, challenge or frank and fearless advice that they don’t want to hear, as they believe they know what they’re doing.
By public servants I mean those below the executive level. The executives do the ministers’ bidding, and yes the consultants present the desired findings.