Some vaguely linked thoughts have been festering in my brain this last week. So this blog comes in three separate but interrelated parts.

1. While there may be superficial similarities, Australia and the US are, on many counts, very different economies;
2. there seems to be some confusion about what ‘economic rationalism’ means in policy terms; and
3. that competition policy (and its legacy) champion competition for competition’s sake has always been a furphy of an argument so for goodness sake get over it.

A little while ago, my nerdy book group decided to read John Quiggan’s latest tome – Economics in Two Lessons: Why Markets Work So Well, and Why They Can Fail So Badly. Early on in my reading I became a little confused about some of the examples he was using. But then it dawned on me – this is not a book by an Australian academic aimed at an Australian market – it is a book by and Australian academic aimed at a US audience. Of course, why not? That’s where the bigger market is – but why not make it clear that you are using US examples not Australian ones? I had to deduce this from my own knowledge and experience. I’m not sure that casual readers either can, or care to, make the distinction and certainly authors (many Australian authors should know better, while most US authors simply assume that we are only talking about/interested in, the US) don’t clarify either. So in part, given we imbue so much American ‘culture’ etc it is not surprising to me that lots of people think we are pretty much the same with the same experiences – except of course we do have different national leaders – our win.

But it highlighted for me the very pertinent fact that our two economies are very different – not just in the obvious way – eg size – but in how they work, how they are administered and what policies are implemented and how.

Sure both countries implemented what I guess commentators have often referred to as ‘economically rational’ policies. Not really sure I know exactly what this means, and I am pretty sure Fred in the street has an even vaguer idea, but firmly believes it is either the work of the devil or a fiendish plot by the economic overlords to grind them into the ground. Be that as it may, I think it generally means policies that look for market solutions rather than government involvement in the day to day running of things. This has, since the late 1970s/early 1980s included governments stepping back from provision of services and utilities, like telecommunications, water, sewerage, energy etc and allowing greater scope for private sector provision of goods and services even within largely government-owned institutions or sectors.

The US has pursued this policy with far greater zeal and reach than Australia. This has meant that in Australia, for the most part, privatisation, corporatision and the like has had a softer edge, has had bounds, limits and regulations imposed more frequently and more invasively than in the US. As a consequence of this less enthusiastic approach, and the fact that often in the media – and academic works – it is difficult to see if reference is being made to the US (usually a default position wherein the author feels no compunction to identify the country to which they are referring because of course it’s the US – US-centric authors abound) or another place – maybe Australia, I think confusion arises about the actual policies in place in Australia and their effects.

So it does seem unreasonable to blanket shame Australian policies for failings in the US. Beware of what you are reading and be sure it is citing relevant matters.

In the wake of the economic turmoil being experienced by the Codiv-19 lockdown there has been all manner of calls for nationalisation of entities – here in Victoria there is an almost cult-like attachment to a mythical beast – the SEC – which has regularly received calls for a Lazarus-like resurrection. (For those not well acquainted with this – it is the old state-owned electricity company which was split up and privatised in the early 1990s. It was a pretty interesting place by all accounts – run by engineers but which, according to some, was a paragon of how to run a successful energy business, trained a multitude of apprentices and single handedly kept the LaTrobe Valley going – I’m just about willing to agree to that last proposition. Sure they trained apprentices – but was that the best use of their resources and did they train the right ones? And yes they kept the lights on – mostly – but did they do so in a truly effective and efficient way? How would they know if they were? What would they have made of the change in energy from coal to renewables? I think you get my drift.)

I get it that at times of uncertainty (now) the past can look particularly rosy. But do you really want to live there? The ever reliable the Hon Kim Carr is calling for the government to boost manufacturing – really? Because that was such a success last time we tried it? Effective rates of protection in excess of 100% couldn’t save many industries from themselves. Sure, make sure we have industry policies which assist industry to thrive – including manufacturing. But please don’t impose tariffs, pay bounties or otherwise prop up industries which we can’t actually sustain without the government lifeline. In fact, the interesting question now is a bit of a reinvention of the old defence argument – we need certain industries because in the event of war we need to be self-reliant. Well that ship has sailed for pretty much every economy on earth. We are so interconnected now that for a small economy like Australia to try to go it alone would be unbelievably expensive and even that assumes we know what we would need to protect. I am hearing very similar arguments now about the need for this, but for production of medical supplies and pharmaceuticals. Time to take a big deep breath, see what actually has happened and how and then draw conclusions.

And then, Clancy Yeats in The Age on 18 April makes a strange song and dance about the ACCC actively allowing firms to cooperate – banks, supermarkets, insurance companies and so on – to provide agreements on how to support their customers during a pandemic.

Usually this sort of behaviour is pounced on by the ACCC, but firms have a defence of public interest under the Competition and Consumer Act. In this case however, the ACCC has retreated from its usual policy of not being proactive, as it usually relies on testing things in court, because, for obvious reasons we don’t have time. But this is not an illustration of competition failing – it is more an acknowledgement that sometimes markets do not produce the best outcomes. Competition policy in Australia has always acknowledged this – as has economic theory. This is no failure of rational economics or neoliberal thinking. But it is recognition that markets are not perfect. That is why most markets are regulated in some way, shape or form. Is this really news?

A couple of random postscripts.

Am I suffering from ISO madness or does it seem to others that our politicians – particularly at the federal level – Prime Minister and Treasurer mainly – have been answering journalists’ questions? And doing so in a straightforward way so they pretty much stick to ‘the facts’ as much as can be known?

One thought I had – and I would appreciate comments from readers more closely involved – are ministers now taking much more notice of the advice of bureaucrats and perhaps the ‘minders’ been a bit sidelined in all of this? Certainly their acceptance of the need to take scientific advice is really encouraging – may they not lose these lessons. But more generally, I can see the hand of measured, dare I say, reasonably non-partisan, advice creeping into their interviews and press releases. A distinct lack of spin is evident. Please let me be right. It would gladden my shrunken little heart to think this might be true and send me into the depths of hope that this may continue.

If I am right, then bureaucrats the ball is in your court – at least for the time being. Time to throw off the shackles of pandering to ministerial whims and offer true open and honest advice.

For the politically minded amongst you – this is an excellent way to get the general population behind you. You should no longer be surprised about what people think and do when you treat them like adults and are straight with them.

So why, oh why, did we get reports yesterday that the head of the National COVID-19 Co-ordination Commission, Neville Power, is championing cheap power – read more gas – oh lordy – and that theme was echoed by our Energy Minister, Angus Taylor. Mr Power, made sensible comments about not indulging in ‘nation building’ investments that only work with heavy government subsidy etc but more gas? Really? Given that he dismisses the Henry tax review options as out of date – not sure why – I think his thinking on where cheap power might be found is also wanting a refresh.  What do you think?