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Jan 19, 2015

Coalition's crony capitalism makes communication harder

The Coalition's economic agenda is straightforward crony capitalism. No wonder they can't explain it to voters.

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In its first two terms, a kind of economic vision of Australia emerged from the Howard government. There were some areas, like tax and industrial relations, that amounted to unfinished business from the Hawke-Keating years. But the real Howard agenda was based on a concept that might be called Homo Aspirationis: a voter not merely freed to pursue individual enrichment, but incentivised to do so. Workers would break free of their union-imposed chains and become individual contractors and miniature corporations; they would send their children to private schools rather than rely on public education; they would live in sprawling McMansions funded by family tax benefits, they would use private healthcare instead of “socialised medicine”; they would share in the bounty of privatisation via asset sales targeted at “Mum and Dad shareholders” (the married, heterosexual, child-bearing couple of course being the Edenic state of Homo Aspirationis). Australia would become a shareholder democracy of rugged individualists heavily subsidised by government.

In the last two terms of that government, aspects of this vision lingered, but it was increasingly swamped by Howard’s constant bribing of voters and, once control of the Senate was secured, long-dormant psycho-pathologies such as Howard’s hatred of the union movement, inculcated during the wages explosion of the early 1980s when he was treasurer.

Now, as John Goodman might have opined in The Big Lebowski, say what you want about Homo Aspirationis, but at least it’s an ethos, Dude. There are no signs of any ethos or even coherent thinking within the Abbott government. Its approach to economic policy, rather, appears based on those industries’ sectors that work closely with the Coalition to achieve policy outcomes that benefit those industries, and industries the Coalition seeks to damage or even destroy. Like a feral BuzzFeed editor that’s been granted executive power, the Coalition’s economic agenda is based on lists.

At the top of the list of friends are two of the country’s most powerful industries: the financial cartel and the resources and energy sector. Both sectors have enormous influence with the Coalition. The government burned significant political capital to repeal the Future of Financial Advice reforms at the behest of the big banks and AMP — at one stage even persisting with the reforms when another influential group, financial planners, opposed the repeal efforts. And the enthusiasm of the Coalition for the mining industry is well known — not merely in the repeal of the mining tax, but in the Prime Minister’s obsessive support for the coal industry and all extractive industries, to the extent of attacking ANU for divesting itself of Santos shares (not long before Santos’ share price collapsed).

Both sectors gave generously to the Coalition in 2012-13. Australian Electoral Commission returns show the Coalition scored over $1.1 million in donations and other funding from resources and energy companies, compared to less than $480,000 to the ALP; the finance sector gave the Coalition over $500,000 compared to around $340,000 to Labor.

Another strong Coalition donor, News Corp, has also benefited. News Corp’s support for the Coalition is provided in kind, via editorial and news coverage support, but nonetheless it has done well from the government: the ABC has been hit with significant funding cuts in an effort to disrupt its ability to compete with — and usually beat — News Corp products across TV, radio and online.

“Industries and business leaders with close connections to the Coalition benefit from public policy.”

A small coterie of senior (in both senses) businessmen have also been given the opportunity to craft the Coalition’s policies, not always successfully. Tony Shepherd was tasked to lead the National Commission of Audit, promptly abandoned as politically toxic. Climate sceptic Dick Warburton was tasked to review the Renewable Energy Target, although, inconveniently for Dick, modelling done for his review showed that it would lead to lower, not higher, electricity prices. Climate denialist Maurice Newman heads the Prime Minister’s business advisory panel. Climate sceptic and former banker David Murray headed the banking industry review, although his stubborn independence appears to have produced a far better review than expected.

The close coordination between favoured sectors and the Coalition has had major implications for economic policy. Repealing the previous government’s effective, low-impact carbon price cost the government over $6 billion in revenue over forward estimates and prompted a reversal in the recent fall in Australia’s energy sector emissions. Repealing the mining tax cost the government — according to its own numbers — over $3 billion. And when it dumped superannuation tax measures targeted at the very wealthiest superannuants, it lost a further $3 billion. This revenue was thrown away at exactly the moment government began bemoaning lower revenue and demanding that low- and middle-income earners bear the burden of helping restore the budget to surplus.

If you’re on the other list, however, there are no tax cuts — only pain. Top of the list of government enemies is the renewable energy sector, which has endured a multibillion-dollar collapse in investment as the “open for business” government has undermined the sector while boosting coal and the beleaguered coal-fired power generation industry. Also under systematic attack is the internet industry. The government aims to impose a surveillance tax on the sector as part of a mandatory mass-surveillance scheme, while imposing an internet-censorship and monitoring regime on ISPs at the behest of the copyright industry, another favoured industry that the government has worked hard to satisfy. Communications Minister Malcolm Turnbull has replaced Labor’s NBN with a shits-and-giggles version under which taxpayers are buying back from Telstra — another Coalition favourite, a privatised near-monopoly being the fruit of the Howard government’s loins etc — an absurdly expensive, ancient copper network that we sold less than a decade ago. The government even appears keen to lift taxes on Australians daring to shop online rather than with local oligopolies.

And the industry superannuation sector, despite persistently and significantly outperforming the retail sector run by the financial cartel, is now being targeted. A former senior executive of the cartel’s Financial Services Council is now guiding super policy as chief of staff to new Assistant Treasurer Josh Frydenberg, who in effect declared war today on industry super.

One of the government’s preferred tools to attack those on its “bad” list is a review. In addition to the ill-fated Warburton review of the RET, it conducted a review of the health impacts of wind farms, a set of claims so thoroughly discredited it may as well have investigated the Illuminati. It recently commenced a “review” of the Bureau of Meteorology at the behest of climate denialists, designed to punish BoM for regularly noting that the climate is warming. The ABC was targeted by Malcolm Turnbull with a review designed to provide justification for the government to break its commitment not to cut funding. Turnbull also used a “cost-benefit analysis” based on Australians’ internet speed requirements actually going backwards to justify his “Copper Magic” broadband network.

There’s a name for this approach to public policy: it’s crony capitalism, pure and simple. Industries and business leaders with close connections to the Coalition, including extensive financial support for the Liberal and National parties, benefit from public policy through tax cuts, direct assistance, “deregulation” and government campaigns against their competitors. Those on the government’s hit-list find that there’s no “deregulation” or tax cuts awaiting them, but reviews and, in some cases, punitively higher levels of regulation. It’s more sophisticated than the naked crony capitalism that is on display in some developing countries, but all the more effective for that.

The problem with crony capitalism, however, is that it’s not any sort of coherent philosophy or vision. It’s simply a list of friends and enemies, a list that can change — mining magnate Clive Palmer has gone from friend to enemy in the space of two years. Homo Aspirationis has been replaced by Homo Listiculous, a playground-level economic theory of who’s in and who’s out of favour. And explaining such a vague motivation, let alone justifying it to voters, is hard enough for competent communicators, let alone this inept government.

Bernard Keane — Politics Editor

Bernard Keane

Politics Editor

Bernard Keane is Crikey’s political editor. Before that he was Crikey’s Canberra press gallery correspondent, covering politics, national security and economics.

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36 comments

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36 thoughts on “Coalition’s crony capitalism makes communication harder

  1. Matthew of Canberra

    They haven’t been helped by political/economic developments, but then – neither were the last lot.

    I think the crony-capitalism aspect has been obvious since the IPA anniversary do in 2013: If you weren’t in that room, I think it was pretty clear that the administration wouldn’t be working for you. The level of support that the PM has had from the other people in the room was their side the deal.

    I think there’s probably quite a lot of pressure on the party not to swap leaders now because it could break the deal. The next leader might decide that the support isn’t worth the cost and that the evidence supports alternative politics – FTTP for example (there goes Murdoch), or a market-based emissions-reduction measure (there goes coal), or a referendum on a republic (there goes Menzies house), or backing off from the deregulation of higher-ed (there goes the IPA). He might even not agree to put 18C back on the table at some future date (there goes you-know-who).

  2. Norman Hanscombe

    Claudio Pompili, you need to check your facts. In the 1970s, long after the Huon Pine felling days were over, Huonville was still a thriving community. Afterwards, when the OTHER local industries dried up, it did go downhill; but even then it was hardly a “ghost town”.

  3. Claudio Pompili

    @David Hand… That’s the same old false argument that the logging companies used in the Huon Valley until every last ancient pine was felled. The local economy collapsed, jobs evaporated, Huonville became a ghost town and the logging companies moved on to plunder other ancient forests and/or greater profits elsewhere. Neo-con ‘trickle down’ economics is discredited.. Get with the programme

  4. Neutral

    To quote myself at 23 in response to 22:

    “You’re saying these parties exist purely to “rort” the system with no chance of any of them going through the administrative hassle and red tape of AEC registration because they are disenchanted with the majors?”

    A lack of response to this question reveals the absurdity of the original claim. Ross Fitzgerald wrote an excellent article on this topic in this weekends edition of the LNP internal newsletter.

    Any electoral reform to limit democracy by the majors could well accelerate the disenchantment against them and backfire.

    Bring.It.On.

    On a different note, Abbott despite his rhetoric around the pitfalls of changing prime ministers during a term is not winning the crowd over. To quote from the same edition of the LNP internal newsletter:

    “He talks in sound bites, seeks to score cheap political points and can’t find a big picture on which to focus …[the sort of behaviour] you’d expect from a low-ranking backbencher…”

    That a prime minister is so determined to be a more effective opposition leader than the incumbent could only be a captain’s call.

  5. Brian Melbourne

    In the past, cronyism was a bit more subtle, I think. The current mob aren’t going to any trouble to hide the bias. Whenever Hockey gets up and bleats about budget problems, he never responds to alternative sources of income, such as the taxes he cancelled, mentioned above or putting some kind of lid on the more obvious rorts, such as 50% CGT discount after 1 year (sliding scale to 10 years wouldn’t be hard to justify), unlimited negative gearing, etc, etc.

  6. bushby jane

    Greg Hunt told us recently that emissions actually increased during the days of the carbon tax, and nobody corrected him.
    Clive Palmer is actually a closet Lib who huffs and puffs a lot. His party hasn’t voted against any of Abbott’s bills yet.

  7. AR

    The usual sound of OneHand fapping in too many obfuscatory posts but points for the “Big business doesn’t vote.” non sequitor – why would it when Toxic & his tories fall over themselves to be bought?
    The old definition of a honest politician is still accurate -“one who stays bought”.

  8. MAC TEZ

    While cronyism and crony-capitalism are not the exclusive to the LNP, this current mob make their predecessors seem tame. The FOFA changes are the perfect example here and I notice that none of Crikeys version of the Three Stooges have anything to say about that. Paul Rowson did not have to wait long to see a wannabe pollie (in the predictable form of the non-member for Drummoyne) defend the notion that donations are good for the democratic process. Norm needs to understand the difference between wishful thinking and wilful delusion.

  9. Luke Hellboy

    An Australian government who prides itself on being “open (and lubed) for (big) business” is just admitting to being a delayed kleptocracy. Corruption delayed is corruption deniable.

  10. Liamj

    Thanks Bernard, crony capitalism is a fair label. It’d be more accurate if we had more real productive capital in this country, but those industries couldn’t afford to buy a big enough piece of the LNP.

  11. Norman Hanscombe

    Paul, you really need to understand the difference between hope & expectation. It’s not subtle.

    Despite your naïve cynicism, there are indeed those who donate [even simultaneously to more than one major Party] because they believe it’s good for the democratic process. you can argue about how many, but absolutist assertions aren’t often the best way to go with complex issues.

    I don’t [as do you] assert that those with a different view must be “deviously corrupt”, and your comment re “naivety” is certainly a word often appropriate for those pretending to evaluate politicians.

  12. JohnB

    I come to this discussion late and note that a particular repeat offender has tried his level best to distrupt the comments.

    So here is mine, for what it is worth.

    Thankyou, Bernard, for distilling into words and sentences that all but the most obtuse would understand. And the message is that, due almost entirely to their own work, the Liberal party leadership are close to being asked to walk the plank.

    What happens from here on is anybody’s guess, somewhat akin to the chaos that followed Rudd 1’s ouster. And followed again following his return as Rudd 2.

    It might not be pretty. It might not be fair. But it will certainly be interesting.

  13. Paul Rowson

    Crony Capitalism is not the sole prerogative of the LNP.

    No industry group, corporation, company or businessman makes a donation to politicians without an expectation of a very profitable payback, just like they don’t advertise except to gain market share.

    Simultaneous donations to both the ALP and LNP are clearly businesses just hedging their bets and protecting their rorts from whomever wins.

    A politician who says that donations are important to a health democracy is either extremely naïve or deviously corrupt. I wont say which I believe, but naivety is not a word I often associated with politicians.

  14. Neutral

    Thankyou for your view. Just so there is no confusion and I understand clearly what you saying let me paraphrase it this way:

    You’re saying these parties exist purely to “rort” the system with no chance of any of them going through the administrative hassle and red tape of AEC registration because they are disenchanted with the majors?

  15. David Hand

    Neutral,
    I would have thought that everyone here would know what the rort in the senate is. Just in case you don’t follow it closely I’ll give you my view.

    It began when the major parties agreed to a change in the way the Senate is elected due to its increasing complexity. They introduced above the line voting, which in effect caused voters to appoint their favourite party as their proxy, effectively voting on their behalf. This worked beautifully until 2004 when Labor in Victoria was worried the Greens might knock them off so preferenced Family First ahead of them. This enabled the conservative Christian Steve Fielding to get elected with 1.88% of the vote and a massive bunch of Labor preferences. Thousands of progressive votes going to a conservative was an accident but the presence of Ricky Muir in the Senate is no accident but a shameless manipulation of the Senate voting system through the creation of a myriad of minor parties.

    Muir got 0.51% of the vote. A series of preference swaps with a bunch of related spurious parties such as “Bullet train for Australia” and “No carbon tax climate sceptics” got him enough of a quota to knock off more established parties.

    The large number of micro parties has nothing to do with voter disenchantment and everything to do with a broken Senate election system.

  16. bill webster

    Don’t forget flogging off our Medicare Private (for $5.7bn) whose profit has grown from $10.4m to $232m in the last 10 years (up 84% last year).

    With the bond rate at 3.2 per cent taxpayers could have kept Medibank and borrowed the money for infrastructure rather than selling a growth asset.

    We could have borrowed that $5.7 billion for $185.4m in interest, fixed for 10 years.

    Numbers from Alan Kohler- http://www.businessspectator.com.au/article/2014/11/24/australian-news/medibank-few-winners-many-losers

  17. treg gregger

    the illuminati is real bernard, just because you’re a double agent and you don’t want people thinking it doesn’t mean we don’t all know what TPTB are up to

  18. Neutral

    Really David?

    Membership is in serious decline across both the majors. Everytime a new ‘identity’ pops up eg PUP – people flock to them in protest. And leave just as quickly once the true colours are known. People are disenchanted and are looking for viable alternatives.

    Which parties have been formed on the basis to “rort” any possible future preference swap deals? I’d like to know so I can put them where they deserve to be on the ballot sheet.

    The majors do preference deals all the time eg Lib and Lab preferencing each other ahead of the greens – is that too a “rort’?

    That micro parties do deals or GVT’s is at least a sign of political freedom. You may wish to call micro parties taking advantage of voter disenchantment a “rort” others may see it as democracy.

  19. David Hand

    Neutral,
    The myriad of micro parties has come about not because of voter disenchantment with the major parties but because of the preference swap rort they can use to get elected to the Senate.

  20. David Hand

    Graeski,
    Why not? The Nats have always been accused of being agrarian socialists and though it is received truth in the Crikey Crypt that the Coalition is only and always in the pocket of big business, there is that dang awkward issue of getting re-elected in 2016. Big business doesn’t vote. Regional NSW does.

    It baffles me why people commenting here don’t give credence to the notion that an MP might be interested in the wellbeing of constituents. There is nothing particularly socialist about that.

  21. rhwombat

    One Hand:
    Invested in coal did you? It’s all about the money for you crony capitalists. That’s your arse BK’s baring.

  22. Neutral

    SusieQ “All we can do is hang in there till the next election and hope there are some viable alternatives.” +1

    Jeanette Weir “The citizens are seen as secondary to policy formation” +1

    Long gone are the days when elected representatives would represent their constituents in parliament. For far too long now it has been the other way around, where representatives represent the ideology of their party to their constituencies.

    Hence the birth and rise of a myriad of micro parties. Hopefully from this sensible government will eventuate.

  23. Jeanette Weir

    Bernard, you outline an obvious trend. An interesting opinion piece was recently posted on the ABC drum by the National Executive Director of Australian Institute of International Affairs regarding think tanks. This piece provided more questions than answers but it did highlight the use by governments of these think tanks. The trouble is that these think tanks are financed by large corporations and I’m assuming they would direct the agenda. Little wonder the citizens are very much disenchanted with their governments. The citizens are seen as secondary to policy formation. Bernard, if you could follow up comments on these think tanks, it would be much appreciated.

  24. Bill Hilliger

    Bernard Keane: …The close coordination between favoured sectors and the Coalition has had major implications for economic policy. Repealing the previous government’s effective, low-impact carbon price cost the government over $6 billion in revenue over forward estimates and prompted a reversal in the recent fall in Australia’s energy sector emissions. Repealing the mining tax cost the government — according to its own numbers — over $3 billion. And when it dumped superannuation tax measures targeted at the very wealthiest superannuants, it lost a further $3 billion. This revenue was thrown away at exactly the moment government began bemoaning lower revenue and demanding that low- and middle-income earners bear the burden of helping restore the budget to surplus.

    Yes for Australian voting sheeples, there is a huge price to be paid by the average taxpayers to keep the main-chancers, quick quids, and rent seekers and other uncategorised of the politically favoured sections of Australia happy. Not forgetting of course one lousy elderly American cretin we all know and despise so much happy.

  25. Graeski

    @David Hand – so are you saying that the Government’s basic motive in supporting the coal mining industry has nothing to do with protecting their wealthy supporters and is in fact a socialist initiative to provide support to workers and their families in regional NSW?

  26. David Hand

    Rick,
    The renewable energy sector cannot survive without masses of taxpayer support. I think that will change but not in the next few years.

  27. David Hand

    What tax dollars, Karen? I guess you’re talking about that trusty perennial, the diesel rebate?

  28. Recalcitrant.Rick

    And there 🙁

  29. Recalcitrant.Rick

    And their might be a ton of work there in renewables, if only Abbott wasn’t so intent on destroying the industry. David, as usual, the sound of one hand clapping. Why don’t you swivel round in your chair and tell Peta that no-one is listening anymore!

  30. Luke Hellboy

    I suppose it will be a coincidence when a bunch of the government politicians get lucrative “consulting” jobs in the finance and resource extraction industries after their parliamentary careers. It’s not corruption if you take your bribe after you leave office.(Alexander Downer at Woodside a prime example.)

  31. Karen

    @David Hand – if the alleged altruistic support of regional Australia is the primary motivation for gifting tax dollars to the mining industries, than what is your theses for the handouts given to the other LNP donating business mates at the absolute expense of everybody else? Or is it simply a coincidence? Give me a break.

  32. David Hand

    Here we have a long meandering piece designed to deliver Keane’s punch-line for the day, “Crony Capitalism”. It doesn’t seem to have occurred to Bernard that the Coalition’s support for coal might have less to do with looking after Glencore and Rio Tinto and more to do with looking after regional towns who will be devastated by the demise of their local coal mines. There are dozens of regional towns across New South Wales and Queensland who are likely to lose their economic mainstay in the next two years.

    I think that coal, particularly thermal coal, is in terminal decline and regional NSW in particular, where most of the coal mined is thermal, is in for a very painful period of adjustment. But I would never expect such policy considerations to make it into a commentary piece in Crikey while the editorial position of your campaigning organ is to paint the government as corrupt.

    Crony capitalism? Ask the residents of regional NSW about that.

  33. wayne robinson

    The ANU’s decision to divest itself of Santos shares was financially sensible even at the time it was done. The share price had been on the slide even before it underwent its plunge in December. Retaining the shares even at the time would have been irrational.

  34. Norman Hanscombe

    I suppose we in the ALP can feel proud that despite the ability of Union Powerbrokers to over-ride Local Branch members’ wishes and determine who gets what in seats and other positions, there has been absolutely no attempt to use that power in a way that resembles cronyism?

  35. Wayne Cusick

    Maybe it’s time we all wrote to the Governor-General asking him to put Abbott’s government out of our misery.

  36. SusieQ

    Excellent and sad at the same time. All we can do is hang in there till the next election and hope there are some viable alternatives.

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