The death of neoliberalism has produced some peculiar contortions from the once stalwart guardian of free markets and deregulation, the Liberal Party, but the issue of forced divestment sees the Liberals and Labor lining up in very unexpected places.
That’s particularly the case after someone within the government shared a draft of the government’s energy bill — which will give it the power to compel companies to divest assets — with Fairfax’s David Crowe.
We already knew the government’s radically interventionist direction had upset a lot of free market Liberals, but the bill provided to Crowe will sharpen that, because it gives the treasurer the power to personally order divestment. It’s not an unfettered power — there must be a report by the ACCC, and the target company can take the matter to court — but plainly someone within the government is worried.
This places the leaker firmly in accord with Labor, which opposes a divestment power outright as being bad for investor certainty. “Giving a Minister the power to break up an energy company on a whim has no place in Australia,” Shadow Treasurer Chris Bowen tweeted this morning. “Economic vandalism better suited to Venezuela than Australia. The Government has had multiple opportunities to develop a coherent energy policy and instead we have this nonsense.” For those who remember the constant business/Liberal/News Corp attacks on Labor over “sovereign risk” a few years back, we definitely ain’t in Kansas any more.
Nor is this atypical of Labor. Under Chris Bowen, Labor has adhered to traditional thinking on competition policy, siding with the Liberal’s free marketeers and the Business Council on the “effects test” issue when Malcolm Turnbull revived it. It is, however, worth noting that Andrew Leigh, who has done extensive work on market concentration before and after becoming a Labor MP, spoke against the effects test as well.
Since then, competition has emerged as a major policy issue across western countries, with growing focus on the damaging impacts of growing market concentration not merely on customers of large firms but employees, investment and productivity. The Economist, which has also been exploring the issue for a couple of years now, devoted this week’s edition to what it calls “The next capitalist revolution”: restoring competition and thus reversing the concentration of market power in the hands of large corporations across western economies, with benefits for wages growth and productivity.
However, The Economist reveals its neoliberal DNA in the underwhelming measures it proposes to achieve that — changing data protection and IP regulation to curb the control of large companies over bulk data, reduce the length of patents and make them harder to get and keep, cut regulations that make it harder for market entrants (like occupational licensing requirements…) and, nebulously, more powers for competition regulators.
Admittedly, The Economist’s primary readership in the UK and the US assume the existence of trust-busting divestment laws that Australia doesn’t have and which Josh Frydenberg’s draft bill proposes. But the extent to which governments intervene to reverse the impacts of market concentration, and how, is a key debate Australia is embarking on along with other countries.
The threshold problem The Economist overlooks is that an important consequence of corporations growing larger and more dominant is that they amass political as well as economic power. They don’t merely increase their power to raise margins, cut wages, stifle innovation and curb investment, they increase their power to dictate to politicians how they are regulated, by paying lobbyists, influencing the media, running advertising campaigns and offering jobs to ex-politicians and public servants.
The Economist urges an end to “complex regulations written by industry lobbyists” that prevent new firms entering markets, not understanding that that’s merely a symptom of the real problem.
And it’s here, oddly enough, that the Liberals’ more draconian approach falls down. Giving the treasurer the key role of ordering divestment isn’t merely bad for investor certainty, it means that it will be a political decision, giving corporations — the targets of divestment, or their competitors — the opportunity to use their power to influence it.
Contra Labor, there’s nothing wrong with a divestment mechanism, but it must be wielded by an independent regulator beyond the reach of the power of giant companies.