The older I get the more sceptical I become. Goes with being a journo, I
guess. I've become ever-more aware that no one and nothing is perfect.
Not political leaders, not parties, not any -isms, not even motherhood.
Take
competition. Economists portray it as the magic answer to almost
everything, but the more I see of it, the more conscious I become of its
drawbacks and limitations.
Which is not to say I don't believe in it.
Far from it. We could use a lot more competition than we've got. But
only in the right places and for the right reasons.
The recent
draft report of the review of competition policy, chaired by emeritus
professor Ian Harper, argues that we need to step up the degree of
competition in the economy if we're to cope with three big sets of
challenges and opportunities that we face: the rise of Asia, our ageing
population and the advent of disruptive digital technologies.
Dead right - up to a point.
We
need more competition in the economy because it's what keeps the
capitalist system working in the interests of the populace, not the
capitalists. But that doesn't mean it makes obvious sense to take areas
of our lives that have been outside the realm of the market and turn
them over to the capitalists.
Economics is about efficient
materialism; making sure the natural, man-made and human resources
available to us are used in ways that yield maximum satisfaction of our
material wants. It argues that economies based on private ownership and
freely operating markets - "capitalist" economies - are the most
efficient.
What's to stop the capitalists using markets to exploit
us and further aggrandise themselves? Competition. Competition between
themselves, but also between us (the consumers) and them (the
producers).
Get this: the ideology of conventional economics holds
that the chief beneficiaries of market economies should be, and will
be, the consumers, not the capitalists.
Market economies are seen
as almost a con trick on capitalists: they scheme away trying to
maximise their profits at our expense, but the system always defeats
them, shifting the benefits to consumers (in the form of better products
and lower prices) and leaving the capitalists with profits no higher
than is necessary to keep them in the game.
What it is that
performs this miracle? Competition. It's not nearly as fanciful as it
sounds. Since the industrial revolution, the history of capitalism is
the history of capitalists latching on to one new technology after
another, hoping for the killing that never materialises.
Take the
latest, digital technology and its effect on my industry, news. Who's
losing? The formerly mighty producers of the soon to be superseded
newspaper technology, including many of their journalists and other
workers. Who's winning? People wanting access to as much news as
possible as cheaply as possible.
For good measure, the cost of
advertising - reflected in the prices of most things we buy - is now a
fraction of what it was. Tough luck for producers, good luck for
consumers. Competition at work.
But, amazing though this process
is, it's far from perfect. Competition doesn't work as well in practice
as it does in theory, for many reasons. A big one is "information
asymmetry" - producers know far more about products than consumers do.
Another is the presence of economies of scale, which has led to most
markets being dominated by a handful of big companies.
Perhaps
most pernicious, however, is the success of some producers in persuading
governments to protect them from the full rigours of competition. Some
industry lobbies are particularly powerful, and the ever-rising cost of
the election arms race has made the two big parties susceptible to the
viewpoints of generous donors.
The report produced by Harper, a
former economics professor, emphasises that competitive pressure needs
to be enhanced for the ultimate benefit of consumers. With so many big
companies enjoying so much power in their markets, we need laws against
anti-competitive practices. He proposes refinements to make these laws
more effective.
He points to industries where governments need to
reform laws that limit competition at the expense of customers: retail
pharmacies, taxis and coastal shipping. He advocates "cost-reflective
road pricing" and an end to restrictions on "parallel imports" of books,
recordings, software and so on (fear not, the internet's doing it for
us) and local zoning laws that implicitly favour incumbents (Woolies and
Coles, for instance) at the expense of new entrants (Aldi and Costco).
But,
predictably, there's little acknowledgement that competition has costs
as well as benefits. It's assumed that if some choice is good, more must
be better. And competition-caused efficiency outweighs all social
considerations.
So the report advocates liberalising liquor
licensing, and deregulation of shopping hours on all but three holy days
a year (the holiest being Anzac Day), without any serious consideration
of the effects on sobriety and crime in the first case or family life,
relationships and what I like to call re-creation in the second.
Similarly,
it sees nothing but benefit in maximising choice and competition
between schools, and wants much more outsourcing of the delivery of
government-funded services to profit-motivated providers.
The
inquiry we need is one to check how well previous experiments in mixing
government funding with the profit motive - in childcare, for instance,
or training courses for international students - have worked in
practice. We need more evaluation and fewer happy economist assumptions.
