IAN McAULEY. The BCA needs to study Argentinian history, and some basic economics.

The Business Council of Australia is running a hysterical campaign against trade unions, Getup! and the Labor Party, as if corporate Australia is facing an existential threat. That’s partisan rubbish.  

Foreshadowing the Business Council of Australia’s announcing its intention to take a prominent stand in the next election, Andrew Bragg wrote in the Financial Review:

If the playing field isn’t levelled, Australia risks becoming the Argentina of the twenty-first century: blessed with opportunity but captured by isolationists, special interest groups and quasi-socialists.

Although I’m not sure who he’s calling “quasi-socialists” (the Peron movement was mid-century), it’s a reasonably sound precis of Australia’s situation.

At the turn of the twentieth century, Argentina and Australia were vying for top ranking as the world’s most prosperous countries. Both were fabulously wealthy and were indeed “blessed with opportunity”. And as we know while Australia prospered, Argentina stalled economically.

But Bragg’s use of that analysis to support the BCA’s unashamed campaign to throw its weight behind the Liberal Party defies both historical facts and economic good sense.

Drawing on comparisons between Argentinian and Australian history, Princeton University historian Ian McLean, author of Why Australia Prospered, showed how in Argentina a wealthy elite used its political power to shape the nation’s policies to its own short-term benefit. He wrote:

If a wealthy elite emerges early, they will likely oppose the extension of the franchise, offer limited support for universal and publicly-funded education, and secure an immigration program that suits their own labor requirements, thus reinforcing a skewed distribution of income and wealth in the community …

With a little shifting of context, it seems as if it’s the Liberal/BCA platform that’s taking us down the Argentinian path. We already have universal franchise, but in its hysterical reaction to Getup!, the BCA wants to tip the electoral field in its own direction, and has asked its 130 members each to contribute $200K to a fighting fund.

As a so-called “business-expense” that would be a tax deduction, meaning that for each such donation $60 000 would be paid by taxpaying Australians. And the money doesn’t belong to the corporate executives or board members: it belongs to the shareholders of these public companies. By contrast, donors to Getup! are spending their own money, and they don’t enjoy a tax deduction.

When the public’s money is used to support a ruling political party’s election campaign, that’s called “corruption” in most countries. And when it’s combined with attempts to muzzle voices of dissent, such as Getup!, that’s the path to a one-party dictatorship.

On immigration, education and labour conditions, the Liberal/BCA platform is quite in line with serving the interests of corporations’ supposed labour requirements. We have an inflow of low-paid short-term foreign workers, lax enforcement of labour standards, a hostile attitude to trade unions, and a government that, for all its rhetoric, is allowing our education standards to slip.

A poorly-paid and under-educated workforce may suit corporations’ short-term bottom line, and may help the government get its unemployment figure down (slave economies don’t have an unemployment problem), but as any first-year economics student knows, it’s a path that leads capitalism to its own destruction. The dynamic of capitalism rests on a well-paid workforce whose spending sustains economic activity, and when workers are well-paid there is an incentive for employers to make sure labour is employed productively.

Bragg is right when he refers to the risk of isolationism, but why is the BCA supporting the Liberal Party? The BCA’s beloved party has turned its back on multilateral institutions such as the WTO, pursuing bilateral and small-group trade deals instead. And on climate change, with its parochial interest in supporting the coal industry, it is turning its back on the world’s most pressing problem.

His punchline is his reference to “special interest groups”. The Liberal Party, and its National Party colleagues, have form when it comes to protecting rent-seekers and special-interest groups. Health insurers enjoying an $11 billion public subsidy, irrigators stealing water, multinational firms and millionaires paying little or no tax, corporate owners of once publicly-owned monopoly utilities enjoying the benevolence of weak regulators … Occasionally their best efforts fail, as when they had to yield to a commission on financial services, but they have to be given credit for trying.

Does not Bragg realize that his new employer, the BCA, is probably the nation’s most strident special interest group? Does he not realize that it’s bad form to publicly dump on your own employer?

The BCA has never been known for non-partisan objectivity. But its concerted attacks on unions, the Labor Party, and Getup! have an air of hysteria. On last Monday’s 7.30 Report, BCA chief Jennifer Westacott seemed to be distressed, as if a mob of murderous bolsheviks were about to storm the Melbourne Club. Then two days later she said in an interview “I will not allow retrograde, backward looking anti-business attacks to stand unchallenged.”

There is no siege of the Melbourne Club. There is no “anti-business” mob seeking to destroy capitalism.

If there is a threat to our prosperity it comes from the ill-considered policies the BCA is promoting. An economic system that tends only to the interests of a privileged elite does not endure. Not only does it undermine the market forces that drive capitalism, but also it destroys capitalism’s social licence and parties supporting it lose their political legitimacy. If the BCA doesn’t realise that business needs a social license, it must have been too busy worrying about the unions, the Labor Party and Getup! to have noticed what’s been happening at the commission on financial services.

Bragg is right. We have a lesson to learn from Argentina. In the early twentieth century while Argentina let privileged elites guide public policy, we in Australia – often with a struggle – developed institutions that were to save capitalism from its own destructive forces – trade unions with a stake in the nation’s prosperity, a taxation system to fund public goods, an understanding that the benefits of prosperity should be fairly distributed, and a lively political culture with voices from every quarter. That’s why Australia prospered while Argentina languished.

 

Ian McAuley is an Adjunct Lecturer in Public Sector Finance at the University of Canberra and a Fellow at the Centre for Policy Development.

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5 Responses to IAN McAULEY. The BCA needs to study Argentinian history, and some basic economics.

  1. Malcolm Crout says:

    I was rejoicing until reading “taxation system to fund public goods” which I would hope is just a slip of logic in an otherwise excellent summation of the economic and policy issues facing Australia. The comparison with Argentina some decades ago with Australia is very relevant with one important variation.
    When the Bretton Woods agreement fell apart in the 70’s, most Governments articulated currencies to float, thus unlocking the potential for currency issuing sovereigns to utlise the power of their fiat in domestic fiscal operations. Taxation became a means to destroy the currency, which is a key to the process of the use of fiat. It is not collected to be stored for funding anything, it simply ceases to exist post collection. This is fundamental to the understanding how deranged economic rationalisation has become and must be highlighted otherwise all the nonsense about balanced budgets and living within our means will continue to exist in the shrinking brains of the polity. Keynes unlocked economic thinking on this matter and it’s high time we reminded those who insist that we raise taxation to pay for stuff are told to get real.

  2. Richard Ure says:

    When it comes to talking under wet cement, Jennifer has been taking lessons from ScoMo. Today on RN Breakfast https://goo.gl/U9dgXU she is surely driven by the self evidence of her argument.

  3. John Thompson says:

    In December 2016 the Australian Tax Office named 670 large companies that paid no corporate tax in the 2014-15 financial year. BCA member companies were prominent in that list. So I find it interesting that BCA’s clamouring for company tax cuts is being led by a board from companies that do not appear to be overburdened by company tax.
    BCA board member Catherine Tanner is from Energy Australia, a Hong Kong company that had Australian income of $7.3 billion in that year and paid no company tax. Board member Tim Reed is from MYOB which paid no company tax. Qantas is represented on the BCA board by Alan Joyce; Qantas paid no company tax on total income of $15.5 billion. The chair of BCA is Grant King who was previously from Origin Energy, another company that paid zero company tax on total income of $12.2 billion. (Mr King, of course, was the BCA representative at the recent Senate hearings that was unable to name another country where company tax cuts had led to the sort of wage increases his organisation was contending.) The other three BCA board members are from companies that did pay company tax: Alison Watkins is from Coca Cola Amatil which paid 3% of total income of $3.7 billion in company tax, Peter Coleman is from Woodside that paid 10% of total income of $8.5 billion, and Joanne Farrell is from mainly foreign owned Rio Tinto that paid 9% of total income in company tax.
    These are the BCA leaders who are calling stridently for reduction in company tax??

  4. Jacqueline Deacon says:

    A very refreshing, insightful read! BCA has also been very sneaky, they set up a couple of websites/groups, pretending they are community groups, Just before the SA state election. Called Centre Ground, and For The Common Good, they don’t mention BCA but have the same address, and Andrew Bragg and Brian Loughnane (Credlins husband) as directors.

  5. John Doyle says:

    The fundamental flaw in all this discussion is the false belief that commonwealth taxes fund federal spending. Malcolm Crout also understand, but we are exceptions. The truth is that federal governments CANNOT tax before spending. This logical flaw is opaque to the mainstream. Spending by the central government creates the national currency. Taxation follows after a] they have earned some money and b] the Government has assessed each payer’s tax liability.
    Taxes have many purposes, but not as revenue. Taxation created unemployment and this ties the government into being the employment enabler. In our “good old days” we had full employment, courtesy of bipartisan agreement. We need to get back to that. It will be our safety net from becoming another Argentina like casualty. The Think tanks all supporting neo-liberalism will push us over the edge if they continue their current course.

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