CHOICE membership

How market forces have failed the nation (its citizens and consumers)

services

#1

This crosses so many existing threads that I figure it deserves one of its own. The seemingly endless stream of Royal Commissions is a symptom of problems impacting consumers. Problems that can be attributed to political mistakes (and perhaps bastardry).
“Aged care is just the latest instance of the failure of contestability and “marketisation” to deliver government services satisfactorily – a great embarrassment to econocrats and governments of both colours.”


Royal Commission into the Banking, Superannuation and Financial Services Industry
#2

I would like to comment on two areas touched on by Gittins regarding the energy market. The first is short and pretty obvious, the second less obvious and necessarily longer but bear with me.

Deregulating electricity is and always was a farce. Nobody can afford to put in competing sets of poles and wires, it is a natural monopoly. The idea that allowing many retailers to compete on paper when they all use the same network and that this competition would constrain prices was just a free-marketer’s hallucination.

Right from the start opening up the gas export market out of QLD was seen by gas producers as a bonanza, not just because they would sell a great deal of product overseas, but also because they would get more per petajoule overseas and domestically . It was also welcomed by the pipeline owners too as more gas would be moved around. The gas pipelines are another natural monopoly. These two groups make up the members of The Australian Petroleum Production & Exploration Association. It’s a misnomer, it’s all about gas much of which has nothing to do with petroleum but is in coal seams.

Free-market capitalism tells us that more supply means lower prices. In this case that idea was wrong because supply was already more than adequate for needs, the east coast market was constrained because it was isolated from the world market, until exports joined us to the world we had a buyers market. Now the markets are linked our domestic prices are rocketing up to match SE Asia. There is no gas shortage despite the NSW Gov, APPEA and now ScoMo saying so and lobbying to open more (mainly unconventional) fields.

NSW has only one functional gas field at Camden and it is very small. Historically our supply has come from several fields in Vic and Moomba (SA). Moomba is getting towards the end of its life but the Vic fields are not. The major owner BHP has said that they have enough gas to supply NSW for decades. Gas consumption rates are not rising. Two other gas fields in NSW have conditional approval but have never gone into production, Santos at Narrabri and AGL at Gloucester. Santos is struggling on but AGL has quit Gloucester and will close Camden soon.

Some interesting factoids from the era of unconstrained coal seam gas expansion in NSW.

  • APPEA, AGL and the NSW Gov all claimed we were running out of gas including winter shortages of household supply. It never happened.
  • AGL said they needed the Gloucester field for domestic supply. When their new field looked doubtful they renewed their contracts with Vic and sold an amount similar to the gas at Gloucester from their QLD holdings, that went for export.
  • The Moomba pipeline, built to send gas south to Sydney started to run backwards, ie to supply QLD a state that had huge new fields and did not need the gas. It was going for export.
  • The then NSW Minister for Resources Anthony Roberts alternately cajoled and threatened the gas industry because their dealings were so obscure. The Minister is charged with ensuring essential supply, a role that he couldn’t do because the industry refused to tell him about their contracts or future supplies. Contrast this with the electricity supply where anybody can get online and find out what is being generated and what is paid. Did the Minister legislate to compel the release of this key data? No he did not, instead he sulked when they ignored him.
  • After a huge public backlash NSW backflipped on future CSG exploration and effectively suspended it.

If you were to dig I think you would find more examples to support the view that it was all about export.

Some recent developments.

  • Despite many calls for it the Feds will not reserve domestic gas. Turnbull threatened the industry (with what exactly we don’t know) if it didn’t behave, hardly a free market.
  • The new Prime Minister has continued to lobby NSW and Vic to open up new gas fields.

This is where we get back to free market economics. The east coast gas market is functionally a cartel that neither the States nor the Feds will formally act against no matter how unpopular they might be. It is run by a few powerful players who have over the last decade manipulated the market, the public and governments. So much for free market capitalism.

I am not suggesting a Communist or control economy just some reasonable balance mediated by elected governments. An economy is not a society.


#3

Indeed they are not, they are falling, and have done so for the past few years.


#4

I have said in a few threads, including the one below:

Sadly, our politician seemingly still tout Keynes’ theories of supply and demand as the be all and end all of economic theory, not realising the theory is not a roadmap, but merely a rough and inaccurate mud map. A quick brief on Keynes

It has been proven that free market economics do not work and Governments need to be active in protecting people, the environment, and the future. An American perspective: Free Markets: What’s The Cost?

The study of the history of economies also gives us dire warnings about rampant free market economies turning into extreme right wing or fascist regimes. “Democracy cannot survive an excessively free market; and containing the market is the task of politics. To ignore that is to court fascism.” The Man from Red Vienna Sadly, the far right wing regimes that seem to be taking hold around the world these days are not looking after their people, instead courting and nurturing the free market.

The indicators from around the world show the increasing distrust that particularly the younger people have of our democratic societies. The ABC {Party’s over: In a nation of cynics, we’re flocking to the fringe} did a published a survey today which clearly shows this occurring here in Australia too.

Unless our mainstream large party politicians come to their senses quickly, the public discontent will cost them, and perhaps us dearly.


#5

Unfortunately, the end-game of capitalism is self-destructive. We are already entering its twilight years, where no job is safe because corporations need to make ever-larger profits. You sack people, downsize, and find that there are less consumers who can afford your products. Better put the prices up - even less consumers.

Our politicians are unable to fix these problems, because they are at the whim of the market. Whether it is funding political campaigns or destroying Spain’s economy because investors didn’t like its government’s policies, The Market currently rules the world - to the detriment of us all.

The extent of market failure is shown most obviously in the US, where in a country of strident capitalism a self-described socialist nearly got the chance to run for the presidency! Twenty years ago, you couldn’t say the word ‘socialist’ there without being derided and laughed at.

The next thirty to fifty years are likely to be a nightmare for the world. We will see capitalism eat itself while the Earth warms unheeded because it’s ‘an externality’. One wonders how bad the next ‘dark ages’ will be.

You can’t ensure anything if you don’t control it - and that is one of the major problems with this charge to privatisation.

You’re blaming the wrong economist. Keynes was buried by the Chicago school. He favoured active government, and Chicago said free markets. When the GFC hit, Keynes was resurrected by even the most strident ‘free market’ advocates - because he was right! And Australia was particularly lucky, acting fast to keep the market alive at whatever cost was necessary. I’m not sure we would be in such good shape had a conservative government been in power at the time - although they may well have done the same thing.

Of course, we do not have ‘free markets’ - we have markets that suit the loudest/richest voices in the room. ‘Free’ trade agreements are nothing of the sort, while all kinds of industry protection are in place locally, nationally and globally! And of course, there is no free movement of labour - almost nobody wants that.

Finally, I see from the SMH article linked by the OP that (presumably tongue-in-cheek) “As everyone knows, the public sector is lazy and wasteful, whereas competition and the profit motive make the private sector very efficient”. This is one of those oft-repeated statements that is made by people who don’t know any better or who are pandering to those who don’t know better. The profit motive does not improve service delivery, it merely means you have to pay extra so shareholders can get their cut! As for deregulation, it is simple stupidity to believe that any large business is able to self-regulate.


#6

Yes we do! :wink: They can usually be found on weekends at the showground or other public place, often called farmers market or similar.
Of course they only make up an infinitesimally small part of “the economy” to which almost all of us are slaves, whether we like it or not.


#7

Well, this has gone off in directions I hadn’t anticipated!

By the standards of today’s economists (and politicians), Keynes was practically a Socialist. Strangely enough, he was on good terms with the hard Right that has led to so much suffering.

Chief among those was Freidrich Hayek. Hayek’s book, “The Road to Serfdom” is more-or-less the bible of extreme Capitalism. Keynes critiqued that book for Hayek. Among what he wrote is this:
“You admit here and there that it is a question of knowing where to draw the line. You agree that the line has to be drawn somewhere, and that the logical extreme [total laissez-faire policies] is not possible. But you give us no guidance as to where to draw it…as soon as you admit that the extreme is not possible and that a line has to be drawn, you are, on your own argument, done for, since you are trying to persuade us that as soon as one moves an inch in the planned direction you are necessarily launched on the slippery slope which will lead you in due course over the precipice.”


Hayek recognised that Capitalism has limits, but couldn’t openly admit it (even to himself). It’s a prime example of “De Nile ain’t just dat river in Egypt”. We see similar psychology in denial of global warming: “It looks like we’re screwing the planet, but that can’t be so, so I refuse to see it”.

George Monbiot likes to refer to “Totalitarian Capitalism”. That’s pretty much where we are. A plutocratic regime, with increasing inequality.

To get back on topic, these are truths that Choice needs to acknowledge and deal with. In the interests of consumers, we must find ways to work around the rich and powerful. Reversing the trends will take more resources than Choice has (and would probably be met with draconian legislation, like that aimed at the likes of GetUp!). It will also take a lot of time (short of bloody revolution).


#8

I’m not aware of the legislation aimed at GetUp - any chance you could fill in the gaps in my knowledge?

We are already being met in anticipation by draconian legislation. You surely don’t think that governments need the Internet to be decrypted, or access to everyone’s metadata, because ‘terrorists’ or ‘paedophiles’? Much of the ‘security’ legislation that Western parliaments have passed over the last couple of decades is aimed squarely at keeping the plebeians in our place while entrenching existing power bases. Security institutions have access to more data about their country’s subjects than they have ever had in history or in most dictatorships, and demand ever more to meet spurious threats!


#9

The extent of political and economic idealism is engaging and a little head spinning. Perhaps from a slightly naive mind it is not that obvious the problem is with the economic thinking of recent governments? Alternately is it a failing of the consumer to better communicate their needs and work with all?

The current Choice Charter
https://www.choice.com.au/about-us/how-choice-is-run

Which truths does Choice need to acknowledge?
Why does Choice need to deal with them?
Should Choice update it’s Charter?

No doubt Choice can always do more, however is there also a point where turning too many issues into a fight simply ensures everyone will stop listening? Is it wiser to comsider what you can do today and plan for tomorrow?


#10

Which is pretty much what I said.


#11

Thanks for that information. Eek!

Looking at the overview, it is a bill designed to keep our triad of political parties in power and to dispossess Australia of any real democratic choice. Making parliament a closed shop. (Side note: the coalition has a big problem with workers organising into unions, but is happy to organise itself into a voting bloc? No consistency.)

Here’s a nice definition from the bill:

political entity means any of the following:
( a ) a registered political party;
( b ) a State branch of a registered political party;
( c ) a candidate in an election (including a by-election);
( d ) a member of a group.

Seriously, a member of the RSL is according to this bill a political entity? What about a member of the Comancheros, or of The Rolling Stones?

I’m not going to read all 83 pages, but am pleased that it has stalled in the Senate (its originating house). Impressively, even the Explanatory Memorandum runs to 60 pages - suggesting that someone wants to baffle us all with BS.

The bill has been referred to four committees for review, with the most recent referral yesterday 19 September 2018 asking the first committee to consider whether changes that have been made since it last reviewed the bill are adequate.

Unfortunately, it is the kind of bill that ends up with bipartisan support. Only the courts are likely able to stop it.


#12

Any group that doesn’t agree with the government of the day, obviously. To the current government, that would include GetUp! and unions. To a different government, it might be business and employer organisations.

The Bill is a rather obvious attempt to exploit concerns over foreign influence to silence domestic opposition.

Getting back to the OP. The rise of laissez-faire policies (including excessive privatisations) has highlighted tensions between capitalism and democracy. A quick Google will turn up any number of articles. Some suggest that capitalism is a danger to democracy, some the other way around. The general idea seems to be that, while democracy benefits from capitalism, capitalism can get along just fine without democracy.

One article from The New Yorker provides some new names and a slightly different perspective (with broadly familiar conclusions):
“In Polanyi’s opinion, whenever the profit-making impulse becomes deadlocked with the need to shield people from its harmful side effects, voters are tempted by the “fascist solution”: reconcile profit and security by forfeiting civic freedom.”

“The system was sustainable politically only as long as those whose lives it ruined didn’t have a say. But, in the late nineteenth and early twentieth centuries, the right to vote spread.”

“For most of human history, he observed, money and the exchange of goods had been embedded within culture, religion, and politics. The experiment of subordinating a nation to a self-adjusting market hadn’t even been attempted until Britain tried it, in the mid-eighteen-thirties, and that effort had required a great deal of coördination and behind-the-scenes management. “Laissez-faire,” Polanyi earnestly joked, “was planned.””

“Once the laissez-faire machine started running, it cheerfully annihilated the people and the natural environment that it made use of, unless it was restrained.”

“The year 1973, in his opinion, marked “the end of the postwar social contract.” Politicians began snipping away restraints on investors and financiers, and the economy returned to spasming and sputtering.”

"“Basically there are two solutions,” Polanyi wrote in 1935. “The extension of the democratic principle from politics to economics, or the abolition of the democratic ‘political sphere’ altogether.””


#13

Or any incorporated non-profit group such as a garden club, amateur players or bush walkers.

We only like lobby groups that are subject to control by The Party Machine or that take us out to expensive lunches regularly at restaurants with excellent wine lists.


#14

Really, is this about the “failure of the market economy” or is it about legislation around political lobbying and donations to organisations that may seek to influence political outcomes?

The legislation currently being debated on and off and caught up in four Senate enquires, which appears now to be the topic of discussion does have a proposed annual cut in limit of $250. Yes there are not for profit clubs and organisations that have membership fees of more than $250.

Is a membership fee a donation?

If this is about funding and membership of Getup or the propossed legislation and it’s effect on registered not for profits it may be better split out to a topic with that clear purpose?

If it is about whether any prior economic theory aligns with current government policy and might reliably predict the future as a consumer, as opposed to the future to a voter, perhaps it also needs to be clear where the emphasis lies?

History does not repeat itself, people repeat history. We all still get to vote.


#15

No we have drifted …


#16

About as far from the known world as Tony Bullimore just before he capsized.

Rescue awaits!


#17

Any discussion that includes terms like “market forces” or “Capitalism” tends to quickly drift into politics, if not religion.


#18

Not to mention “capsized” and “rescue” … oh, wait …


#19

I don’t think it’s too much of a stretch to link the failures of capitalism to the failures of our polity - and from there to the proposed legislation. Established political parties around the world are currently facing voter backlash because they are being driven by market forces rather than by what their people want.

The idea that Australia’s established parties have sought to block other entrants has a long history; the current bill attempting to do so is working against ‘market forces’ - in this instance, the voter. In a ‘free’ political market, many of the restrictions that currently exist would have to be removed - and the current bill would be laughed out of the parliament.

John Howard didn’t want us all to vote, when he tried to restrict enrolment periods for people turning 18 (and fortunately was overruled by the courts).

As of the 1999 referendum (the only clear Australian Electoral Commission (AEC) source Google and the AEC gave me and/or I could easily find):

The following Australians are not entitled to enrol and vote:

  • people who are incapable of understanding the nature and significance of enrolment and voting
  • prisoners serving a sentence of five years or longer
  • people who have been convicted of treason and not pardoned.

(Here is a current link regarding prisoners - they have been further disenfranchised, as those serving a sentence of three years or longer are now not permitted to vote.)

The US has taken disenfranchisement of minorities to extremes - along with its incarceration levels.

Historically, Aboriginal Australians only got the vote in 1962, and as shown above there are plenty of opportunities for it to be removed minority by minority.

/We now return this channel to its scheduled program

The 20th century ‘economic miracle’ occurred between 1945 and the early 1970s. During this time, there was a Gold Standard, an agreement on exchange rates, and a rapidly growing international economy. The only losers were the poorest countries - and they remain the losers in the current ‘world order’. From this article:

Since the 1970s countries have floated their currencies, dropped the Gold Standard (while still keeping some for a rainy day), entered into ‘free’ ‘trade’ agreements and been in a cycle of booms and busts every decade or so. The benefits have since the 1980s largely accrued to those who were already at the top of the pile, and everyone else has gone backwards. I heard an Australian podcaster claim recently that his was the last generation that could expect to be better off than their parents!

Governments have embraced the free market and it has created chaos. When the Soviet Union collapsed, Russia was forced into ‘rapid economic liberalisation’ - also called ‘shock therapy’ - by the World Bank and International Monetary Fund. The result? Poverty on a massive scale, and a few rich oligarchs. This was simply a condensed version of what all countries are currently going through, and our politicians do not have a solution but are part of the problem. Both sides of federal parliament believe in ‘the market’ post-Hawke/Keating. Voters know better, but have no real say.

Market forces will continue to fail most people, and we will continue to be given no choice but to vote for the better lizard, until externalities bring the world to crisis point or beyond.


#20

If GDP per Capita is meaningful there are only a few large economies that have performed worse than Australia over 54 years. The USA, New Zealand, Sweden and Switzerland?

The most successful improvers to the upper left include Singapore, South Korea, Equitorial Guinea, and Botswana with Taiwan, Hong Kong, Romania, Indonesia and others in a scramble for next place.

Perhaps it is also necessary to consider the value and quality of their democracies, social equity, and typical standard of living as outcomes of their choices? Their economies are all as different as are their political environments varied.

Notably some of the African nations with the least stable politics have the worst outcomes, Eg DRC, Central African Republic etc. However for every poor outcome African nation there are at least another two to three that are better off. Even Ethiopia sits far to the left of the base line.

With all the scatter of outcomes it appears possible to pick
pairs of nations to support or argue any position on the connection between economic outcomes, politics and market behaviour. You can pick unstable nations politically with significantly improved GDP per capita but also very stable effectively single party democratic states with similar outcomes. (Is that really Australia’s problem - too many political parties? Apologies if this sounds like an LNP lament. It isn’t intended.)

GB and the major EU nations have done notably better than Australia. (Noted: Chart is on a log scale). Singapore, Taiwan, Hong Kong, Indonesia and Thailand have all done much better. Who out of these has the broadest democracy? Who out of these has the largest disparity between wealth and low income workers? Which nation has the lowest car ownership or lowest life expectancy? Should we also consider reliance on public transport?

Is how we are today in Australia failure or by recognising our few faults can we can do better tomorrow?