It’s a peculiar world in which policy flake Barnaby Joyce speaks more sense on a progressive idea than a Labor Party siding with business, but there it is. Labor is talking of joining business lobby groups like the BCA and ACCI in opposing the government’s planned forced divestment power in the energy sector, while Barnaby Joyce thinks it’s such a good idea it should be extended across the whole economy.
Difficult as it is for me to type, but… Barnaby is right. Although for reasons that might alarm both him and Scott Morrison.
The market power of large corporations, and their ability to shape the democratic and regulatory process to their own ends, is emerging as one of the key economic issues of the current period of economic and political stability across the west — one at the heart of the communities’ disaffection toward both their governments and economies seen to be working for the interests of the powerful and not their own.
It’s not a new idea — a lot of us are playing catch-up with Marxist economists and critics of monopoly capitalism from the post-war era. But it’s one attracting growing attention not merely from academic economists but even prominent neoliberal institutions like the International Monetary Fund. The more dominant large companies become in their markets, the less they invest and innovate, and more downward pressure they exert on wages, with any efficiencies and economies of scale flowing to shareholders or used to crush competitors. Market power is anathema to decent wages growth, productivity and economic growth.
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A divestment power isn’t some magic solution to growing concentration — it certainly hasn’t been in the United States, where the use of trust-busting powers has waxed and waned with regulatory and political fashions since the late 19th century. You need a regulator prepared to use such a power, or credibly threaten to do so. But its existence offers a significant addition to the powers of competition regulators and would be particularly important in a medium-sized, small-population economy like ours that is predisposed toward oligopoly.
Opponents who argue — as Labor and the business lobby has — that a divestment power would deter investment by creating uncertainty, should furnish evidence of where exactly that has happened — in the US, Canada or the EU, either in relation to the existence of such powers, or their (much more rare) use. And that deterrent effect has to be measured against the clear evidence that forced or merger-related divestiture leads to price falls and lower price increases.
Labor — which has mostly been far more adept at adjusting its economic policies to the electoral rejection of neoliberalism than the Coalition — has elected to side with business when it should be seeing the Liberals’ embrace of forced divestment as an historic opportunity to provide the foundations for a rollback of market concentration. In the hands of a sufficiently aggressive regulator, divestment powers could enable the long-term reversal of one of the key impediments to wages growth, investment and innovation.
Each divestment would be bitterly fought, and the benefits would be long-term and hard to identify for individuals. But the results of enabling growing concentration are all around us in non-existent wages growth, angry consumers and angry voters.