John Menadue. Is the state being captured by special interests?

In his recent book, ‘The Origin of Political Order and Political Decay’ Francis Fukuyama of ‘End of History’ fame, focuses on how even developed and democratic societies can be captured by powerful vested interests. He suggests that this has happened in the US with the coalition of extremists in big business, the Republican Party and the Tea Party.

First there was the crippling of the political process in the US with money and lobbying; then followed the capture of the state.

It is a warning for us. We have the institutions of democracy- responsible government, a parliamentary system, the rule of law and a ‘free’ press. But we run a serious risk of these institutions being hollowed out by powerful, wealthy and unrepresentative vested interests.  In Australia we are seeing what Ross Garnaut has called a ‘diabolical problem’, the power of the polluter lobby. Ken Henry has spoken of the appalling public debate on key issues.

Perhaps the only US lobby group that we are not tracking is the gun lobby

There is no better illustration of the threats we face than donations by the rich and powerful to buy favours from political parties and the state. The US sets an appalling precedent with its Supreme Court opening the flood gates for political donations.

Our mining sector has an effective veto on mining tax reform. For $20 million the mining lobby threatened the elected government and saved itself billions of dollars in tax. Will any Australian government in future ever seriously address reform of our mining taxes?

The payment of tax in Australia by many wealthy people and large corporations is optional. It is costing us tens of billions of dollars each year. Fifty seven percent of our ASX100 companies have subsidiaries in tax havens. One third of the top ASX200 companies pay company taxes of 10 % or less. The statutory rate is 30%. We need to hear from senior executives before a Royal Commission how  companies like Westfields, Glencore, Ikea, Google, Apple and News Ltd can avoid so much tax.

Wealthy and powerful interests are handed out tax benefits in superannuation deductions, capital gains, negative gearing, family trusts, salary packaging and subsidies to coal, oil and gas companies. Yet we are told that we have to cut back on welfare concessions to fund the disability program. Australian government expenditure is one of the lowest in the developed world but wealthy interests keep proposing cuts to government spending and cuts in taxation.

With over 60% of newspaper circulations in Australia, News Ltd is a major supporter of vested interests including Big Tobacco. It is an obstacle to informed debate on key public issues. News Ltd aided our disastrous involvement in Iraq and is vehemently opposes serious action on carbon emissions. News Ltd is polluting the public debate in Australia more than any other company.

The ABC is under attack by News Ltd and other powerful interests.

With journalists under-resourced, the media depends increasingly on the propaganda and promotion put into the public arena by vested interests. The Australian Centre for Independent Journalism at UTS found in a survey of major metropolitan newspapers published in Australia in 2010 that 55% of content was driven by public relations handouts from lobbyists and their associated public relations arms.

There are over 900 full time independent lobbyists working in Canberra. That is over 30 lobbyists for every Cabinet minister. On top of these third party lobbyists there are special interests who conduct their own lobbying, e.g. Australian Mining Council and Australian Pharmacy Guild. On top of these lobbyists in Canberra, there are the lobbyists in state capitals. These lobbyists encompass the whole range of interests; mining, clubs, hospitals, private health funds, business and hotels that have all successfully challenged government policy and the public interest.  They are doing great damage in undermining the public interest.

The health ‘debate’ is really between the Minister and the Australian Medical Association which opposes workforce reform, the Australian Pharmacy Guild that restricts competition, Medicines Australia which exploits its monopoly pricing power and the private health insurance companies which get a taxpayer funded subsidy of over $6 b per annum to undermine Medicare. All these vested interests effectively push aside the public interest.

The wealthy private schools, with their influential alumni, lobby against needs-based funding which is necessary for both equity and efficiency.

Most of the business economists that we see on television to ‘inform’ us are employees of banks and other financial institutions. They are unlikely to tell us about the conflict of interest of financial advisers employed by the banks. Public intellectuals have gone missing in action.

Many of the ‘think tanks’ that pose as independent are funded by secret and  powerful interests. Yet we take them seriously.

The wealthy polluters successfully destroyed an emission trading scheme and the carbon tax. We no longer have any credible program to reduce carbon emissions.

We have seen enormous concessions given to casino operators without proper public processes and transparency.  The casino operators lobby both sides of politics.

The wealthy and powerful have little sense of their enormous privileges and the damage that they are wreaking. During the debate on the mining tax we had the richest people in Australia such as Gina Rinehart and Twiggy Forrest protesting from the back of trucks about how the poor mining companies were being threatened. They should have been laughed off the political stage but we took them seriously. They tell us that the sky will fall in if their privileges are challenged. .

One of the objectives of the privileged and News Ltd in particular is the discrediting of the whole political process and politicians. They are concerned because it is through political action that their privileges will be challenged. They tell us that only the private sector produces benefits for the community and that the government is both a burden and inefficient. Yet governments have been great contributors in the past and must be in the future.

The discrediting of our parliament and government reached a peak during the last parliament with disruption and wild accusations of corruption. We need to improve our political processes because they are essential to any reform of our democratic institutions and countering vested interests.

We face a serious threat with the hollowing out of our democratic institutions through the actions of wealthy and powerful vested interests. We should not take our liberal democracy for granted. It faces a serious threat from within.

It is getting late and dark.

Where is the protest movement to check the abuses by the wealthy and powerful and the takeover of the state for their own purposes?


John Laurence Menadue is the publisher of Pearls & Irritations. He has had a distinguished career both in the private sector and in the Public Service.

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6 Responses to John Menadue. Is the state being captured by special interests?

  1. Janet Simpson says:

    1) politicians take an oath to act only in the natonal interest
    2) parliament uses bi-partisan expert panels to advise on policy matters
    3) introduce an internal parliamentary Ombudsman and Federal ICAC to impeach those who put other interests ahead of the national interest

  2. NGruen1 says:

    John, on the mining tax, the government faced a much easier task than Howard did with the GST or Hawke did with CGT, FBT and tariff reform. It needed to persevere for a year or so and rivers of gold would have flooded in. In unusual circumstances a government that had been used to stratospheric popularity panicked.

  3. Glen Tye says:

    Recently on a trip to central western NSW I was pleasantly surprised by general support for the view that the Coalition’s first budget was disappointing and unfair targeting those most in need of assistance and support. There seems little support for the Government but great frustration with the alternatives. Perhaps this view together with the recent State election outcomes provides the basis for protest on a number of fronts.
    Unfortunately I don’t see Labor has the inclination, courage or capacity to grasp the opportunity to present an alternative vision with the public interest at its heart. Their inclination is to kowtow to the same powerful elites, a position that will ensure they remain on the opposition benches despite the distastefulness and dishonesty of this Government.

  4. Chris Flamer says:

    I have just finished reading A Short History of Stupid by Bernard Keane and Helen Razer.The subtitle is …The decline of reason and why public debate makes us want to scream.Incisive and entertaining reading and very much to the points you address.Rather telling was the quote by Upton Sinclair:It is difficult to get a man to understand something,when his salary depends on his not understanding it.

  5. Brett Page says:

    Where are the statements like this from the chinless Denis Hart? What an insipid and uninspiring man.

  6. Michael D.Breen says:

    John, your excellent, non alarmist, non sensational proves your rhetorical question beyond doubt. Governments no longer govern nor run our country when you look at the figures. Powerful elites, lobbyists and vested interests are far smarter than “the children of light”. And the American notion that government is less efficient than private interests is a cancerous enabling premise, for bigger business. When money and power top thought every shred of decency goes.
    You know all this, you ask where are the protests. So do I. What are the levers for those who simply want fair government, people paying their taxes, the needy getting help and accountable government with the checks and balances working.
    People always say of the emergence of cruel despotic regimes that the locals, “Must have known. Surely they could have done something”. You have given us the facts, yours is not an isolated voice; what do we do next?

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