A battle to shape the nature of the economic settlement that will follow the virus crisis is now underway. There’s a powerful push from business interests and their political and media agents to use the crisis to renew a push for company tax cuts, a return to WorkChoices and deregulation, despite many commentators suggesting a new era of government intervention will inevitably unfold in the wake of COVID-19.
Last week, Scott Morrison warned that the economic crisis engendered by the virus lockdown meant “the policy frameworks that we had prior to the election will need to be reconsidered”, and that meant “policy measures that are going to have to be very pro-growth, that are going to enable businesses to employ people, that will enable businesses to invest and businesses to move forward”.
Anonymous senior ministers then fleshed out that agenda: company tax cuts and an “aggressive” overhaul of industrial relations.
The Business Council’s (BCA) Jennifer Westacott claimed on the weekend that “once and for all we need to make it easier to do business and get rid of unnecessary red tape … we must strengthen our global competitiveness and efficiency”. Australian Industry Group’s Innes Willox also called for company tax cuts and “sufficient flexibility to change workplace arrangements”.
The BCA, which has sought to use first the bushfire crisis, and now the pandemic, as an opportunity to rehabilitate the reputation of big business, today launched its post-pandemic economy plan, demanding that the focus must be on regulatory relief and reform. “Governments have been working closely with industry over recent weeks to remove regulatory burdens and unnecessary red tape. This must continue … [and would include] removing barriers to industry commencing major employment-based projects”.
The Financial Review, which has been repeatedly demanding that the crisis be used to overhaul the economy (including reducing the wages and conditions of health workers), today called for “workplace, tax, and regulatory reform”, including “reducing the excessive tax burden on foreign capital” and “removing the pointless rigidities in the default workplace award system”.
While many progressives and even conservatives in different economies have been assuming that the world has changed forever and a new era of big government and less capitalism is inevitable, it’s clear that the crisis will provide the basis for a renewed push by corporations, the politicians they donate to and the media that advocates for them for the same “reform” agenda that they’ve long advocated.
Despite the pandemic, what hasn’t changed, certainly in Australia, are the power structures that give corporations sway over public policy: a virtually unregulated political donations system, an almost complete lack of transparency around influence-wielding, a revolving door between the political system and corporate appointments, a media sector dominated by partisan and ideological media outlets, a politicised public service and the absence of a federal anti-corruption body.
These structures will be critical to the shaping of the post-pandemic economic settlement, with business and conservative politicians arguing that a pro-corporate agenda is justified by the urgent need for faster economic growth and large government debt, and the need to “get Australia back to work”.
But what has changed is that we now have clearer evidence than ever that company tax cuts don’t deliver any benefits for the broader economy. Two years on from Donald Trump’s massive company tax cuts in the United States, the only tangible result is that the US budget deficit even before the crisis was headed to over $1 trillion and large US corporations engaged in an historic surge in share buybacks.
The claimed investment boom that was going to result from the tax cuts never materialised, according to the International Monetary Fund. US wages growth slowed noticeably after the tax cuts in 2018 and 2019, directly contrary to Trump administration predictions.
Even one-off bonuses, touted by outlets like the Financial Review as evidence of the tax cuts working, slumped below Obama-era levels after a brief, small increase in the aftermath of the cuts. Overall, according to independent economists last year, the cuts led to “a relatively small (if any) first-year effect on the economy”.
Any argument that the post-pandemic economy needs a company tax cut — which would of course, impose a greater burden of debt repayment on the rest of the community — thus needs to address the hard evidence that US company tax cuts delivered no benefits except to investors and corporate executives.
That can be coupled with the longstanding evidence that WorkChoices significantly damaged labour productivity growth, which only recovered once Labor removed WorkChoices, but which has, since the election of the Coalition and further anti-union legislation, stalled again, and now begun reversing.
As has long been clear, the “reform” agenda favoured by corporations, the politicians they donate to and media outlets like the Financial Review favours company shareholders and executives, and not the economy, workers or consumers. But the push to reframe the crisis as necessitating those “reforms” is on in earnest.
There’ll be no fundamental change of the kind many progressives are assuming without recognition that the power structure that will resist it needs to be addressed.