If the 2007/08 Global Financial Crisis wasn’t sufficient evidence that something is deeply pathological within the contemporary capitalist system, then Ken Henry’s at times truculent, at times ruminative responses to questioning before the Financial Services Royal Commission should provide food for thought. He pinpointed some serious defects that have grown like virulent cancers across the finance industry in this country. The economic blinkers blinding our big bank officials are being stripped away and they don’t like what they are at last being forced to acknowledge. The Royal Commission’s work has revealed in lurid detail, that contemporary capitalism in Australia has run amok.
At his appearance before the Financial Services Royal Commission, NAB board chairman Dr Ken Henry was both defensive and contemplative as he faced the questioning of the excellent Ms Rowena Orr, SC. Ms Orr’s calm but insistent questioning at times seemed to irritate Dr Henry; at other times it led him to soliloquise, almost ruefully. He appeared to agree that his bank (like all of the big banks) had single-mindedly placed rent seeking and profits way ahead of ethical and customer-focused service – service, that is, which is based on a clear understanding that banks and other financial institutions owe an irrevocable duty of care to their customers. That kind of service has been entirely absent in the Australian financial services sector for a very long time now. The industry’s clients, and the Australian economy, have suffered direly as a result.
Dr Henry suggested that the Commission may wish to recommend a significant overhaul of laws defining the fiduciary responsibilities of directors. Bring it on! He seemed to agree that the NAB board had been wanting in its oversight of NAB management, particularly in regard to salaries and bonuses for senior executives. He nonetheless stood out from his peers in the banking industry for his apparent desire to engage seriously, if combatively, with the Commission’s probings.
Other senior bank officials were content to offer mealy-mouthed, half-sincere apologies for myriad examples of malfeasance on their part, all of which would have remained concealed from the public gaze had they not been exposed so comprehensively by the Commission. Even so, it is now painfully obvious that there is more work for the Commission to do. The hope is that its remit with be extended, and its terms of reference expanded, possible by a Labor government.
Many will be waiting with great expectations for the final report by Commissioner Kenneth Hayne early in the New Year. Hopefully it will be a watershed moment in the way this country both understands and regulates the forms of capitalism that now operate across the Australian economy.
It is important to be fully aware of the precise character of that capitalism. It is unlike the capitalism that Australia experienced in the two decades or so after World War II. That capitalism was relatively restrained. It saw governments intervening positively in the economy, initiating developments that were major boosts to economic growth – simultaneously benefitting the private sector, while (more importantly) contributing to the public good. They included remarkably successful initiatives like the original Snowy Mountains Scheme, the introduction of large-scale immigration programs and, at state level, publicly-owned corporations like the State Electricity Commission in Victoria.
But as the Australian economy began to grow throughout the 1960s and 1970s the captains of industry and their cronies across the finance industry began demanding – and receiving – a greater share of the economic pie. This was the era in which private interests began preying on – stalking – successful public enterprises. They saw financial advantages for themselves if governments could be persuaded, or cajoled, into selling off public assets. The idea that the public good might be imperilled by privatising these public assets never entered the heads of these private sector predators – and even if it had they wouldn’t have given a toss. They were totally in it for themselves. So much so that we can call this the era of predatory capitalism.
By the 1970s the economic ideology known as neoliberalism or economic rationalism had taken a firm grip on the imaginations of the country’s political and business leaders. Federal and state governments fell over themselves to sell of public assets to the private sector. Electricity and water supply providers, state banks, public transport facilities, even prisons were shifted into the private sector with promises that cheaper and more efficient services would be the result. But the results have been anything but cheaper and more efficient, resulting in what we can term parasitic capitalism – an era of blindly irrational and out of control capitalism that is increasingly in danger of cannibalising itself. Ordinary Australians are not benefiting at all.
It would be ludicrous to expect the Morrison Coalition government to respond wisely to any recommendations Commissioner Hayne may make. It lacks both the intellectual and emotional intelligence to understand the massive damage their neoliberal proclivities have done to Australian society and the economy. Morrison himself, for example, ridiculed the call for a Royal Commission into the banks as “populist whinging”.
Nor can we expect much from Bill Shorten who not so long ago rubbished the idea of a publicly owned bank to compete with the four banks on the grounds that “nationalising” one of them would be too expensive.
There is no need to talk of nationalising anything. What all along has been obvious is that there needs to be institutions in the public sector competing alongside those in the private sector, to bring the Australian economy back into balance. We need to start with a publicly-owned bank, an insurance company, a nation-wide public medical service (including dental health services), and a public real estate agency. Once these institutions are up and running, we shall see the taming of predatory and parasitic capitalism; their running amok will come to an end.
Allan Patience is a political scientist in the University of Melbourne.