Economy class: How the spirit of Australia became crony capitalism

If I were clever, I would have followed through on an idea I had a handful of years ago and set up an investment fund to put money into the businesses whose CEOs spend most time in Canberra schmoozing politicians. These companies have an outsized knack of securing government grants and competitive favours. I would be rich by now and scrolling gleefully through my share portfolio.

Instead, I spend my time scrolling through reader comments. There, it’s come to my attention that many readers think the Qantas scandal and others like it are expressions of neoliberalism. When people begin to subscribe to that view, it disguises the real source of structural unfairness, which is those schmoozing CEOs securing their companies an unearned advantage.

So let’s talk about neoliberalism, baby, as a nerd version of Salt-N-Pepa might’ve sung. Let’s talk about all the good things and the bad things that make up our economy.

Neoliberalism is “a political approach that favours free-market capitalism, deregulation, and reduction in government spending”. Legend has it, we once had something approaching it in Australia, when Bob Hawke and Paul Keating stopped subsidising a bunch of industries, dismantled the protectionist tariff system, deregulated the financial system and floated the dollar.

But it should only take a second to realise that none of the defining characteristics of neoliberalism now apply to the Australian economy. Government spending is only going up. Australia is highly regulated. And “free market” capitalism? Well, in a free market, Qantas would have had to compete with Qatar.

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Regulation is not necessarily bad. For the most part, Australians like living in a highly regulated country. In going about our daily lives, we have the luxury of trusting that our medicines are safe (thanks largely to the Therapeutic Goods Administration), our food uncontaminated (Food Standards Australia and New Zealand) and our roads orderly (National Transport Commission).

But it’s not a free market at all when the government exercises its regulatory powers to favour one company over another. As long as the government was willing to deploy regulation in its favour, there was nothing to stop Qantas but shame – and that appears to have been in very short supply.

Given that we don’t have a free market, we’re highly regulated and government spending is only rising, it is simply definitionally incorrect to say that Australia has a neoliberal economy. But there is a great deal of unfairness in Australia and companies are often able to screw over customers and workers. It’s hard to get economists to agree on anything, but on this many Australian economists agree.

UNSW economics professor Richard Holden says “the corporate scandals in Australia … are the result of crony capitalism”. Meanwhile, anti-neoliberal Queensland university economist John Quiggin argues that the reason Qantas was able to behave the way it did was because it “was able to use a dominant position achieved under public ownership to behave as an aggressive profit-maximiser, while still trading on its image as the ‘national flag carrier’”. That is, Qantas had an outsized advantage from before it was privatised. That advantage is, of course, the favouritism shown it by policymakers.

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It comes as no surprise that RMIT economics professor Sinclair Davidson, who used to be at the Institute for Public Affairs in its economics-focused era, believes that the Qantas scandal shows that the economy “isn’t neoliberal enough”. In his words, “The rise of crony capitalism has occurred because business has moved away from its core function of producing goods and services that meet the needs of paying customers in the hope of earning a profit.”

But it is instructive that Davidson finds himself on a unity ticket with Matt Grudnoff from the progressive Australia Institute. Grudnoff says the problem we have in Australia is that we don’t have enough competition – because we’ve drifted away from a free-market system into an oligopolistic one.

In Australia, working the government angle has become the most profitable game in town for big business. As US economist Michael Munger explains, there comes a point in a company’s productivity cycle where it can’t get any more efficiencies out of innovation. When that happens, Grudnoff says, they turn to government to shut out competitors. If there’s not much competition for only a few big players, suppliers and workers have no choice but to take the money they’re offered.

Sinclair Davidson believes that’s only going to get worse. “The broader issue,” he says, “is the politicisation of business. The clear boundaries between what is private and public have broken down. So we’ll see more of this in future, not less.”

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Qantas is not the only company that has benefited. It was just so brazen that it made our economic system visible even to people who don’t spend their time thinking about economic systems.

So let’s take the opportunity to say what’s really wrong in our economy. Because as long as Australians keep blaming the wrong culprit, cronyism will thrive, with all its attendant ills.

As Salt-N-Pepa might say: “Don’t be coy, avoid, or make void the topic, cuz that ain’t gonna stop it.” Let’s talk about economics, baby.

Parnell Palme McGuinness is managing director at campaigns firm Agenda C. She has done work for the Liberal Party and the German Greens.