The lockdown is dragging on so long and its end point is so uncertain that it’s easy to become anxious and despondent. That’s especially true of the young, who’ve had less experience of bad episodes eventually passing. The rest of us know they will, however long it takes. But it may help if we switch the focus to what we’ll do to make the world a better place once things return to normal.
One conclusion the young are justified in reaching is that the world is run by well-off older men (present company excepted) intent on making the world better for themselves, even if that comes at the expense of others.
A question for the coming federal election is which side is more likely to restrain the rich and powerful rather than help them in their quest.
It’s true that people near the very top have continued doing better, while the rest of us have had very modest pay rises. In healthy market economies, vigorous competition and continuous investment in better machines increases the productivity of workers, which is reflected in higher real wages.
There’s been very little of that over the past decade and one reason for this seems to be a decline in competition between the few big businesses that dominate so many of our markets.
When companies get bigger by taking over their competitors, this gives them more power to increase their prices and profits (and executive salaries) without them becoming more efficient or paying their workers more.
The list of Australian markets dominated by a few large firms is long, including banking, supermarkets, insurance, electricity and gas retailing, domestic air travel, pathology testing, mobile phones and internet service providers, not to mention internet search and social media platforms.
It may surprise you that, contrary to what happens in other advanced economies, companies seeking to merge don’t need permission from the ACCC, the Australian Competition and Consumer Commission.
Many choose to consult the commission, but if they press on with a merger the ACCC thinks will increase their “market power”, its only recourse is to take them to the Federal Court and convince it that the merger would “substantially lessen competition” in the future.
This isn’t easy. The executives generally assure the judges that something so dastardly has never crossed their mind, and their assurances are believed. The last seven times the commission has sought to get mergers blocked, it has failed.
It’s not the court’s job to come back a few years later and see if those assurances were honoured by the rich and powerful men whose evidence the judges found it so easy to believe.
So, in a speech last week, commission chair Rod Sims sought to start a public debate on “market concentration” and proposed that the proponents of mergers be legally required to notify the commission of their intentions, then wait for the deal to be assessed and cleared before proceeding. The proponents could appeal in court against any decision they didn’t like.
Sims says competitive markets work much better for consumers, and increase innovation and productivity.
“While the available evidence is not definitive, it appears that market power [to raise prices] is increasing in Australia. This trend has also been observed in many advanced economies, including by the International Monetary Fund,” he says.
“Without action, market power in Australia will become further entrenched; and will certainly not reduce.”
Market power is hurting Australians in many ways, he says. Consumers are paying more than they should for a wide range of goods and services.
It’s also “squeezing the incomes of farmers. For example, chicken growers and dairy farmers have little option but to sell their produce to large buyers with substantial bargaining power.” Farmers purchase many of their supplies from only a few big sellers.
“Many small businesses and farmers are largely reliant on Coles and Woolworths to access grocery shoppers ... This power imbalance places small businesses and farmers in precarious positions with consequent damage to our economy.
“In digital markets, we are exchanging access to our personal data and attention for so-called ‘free’ services, but have little choice, knowledge or control over how our data is being used.”
Now, if you’re sitting down, I’ll tell you something that will amaze. Jennifer Westacott, chief executive of the Business Council of Australia, can’t see what the fuss is about. She fears the proposed changes would be “another blow to investment”. (By which I assume she means businesses “investing” in the takeover of other businesses.)
As for Treasurer Josh Frydenberg, he has no enthusiasm for Sims’ reforms. He says the lockdown means we need to encourage business and growth, not throw up regulatory barriers. (I suspect we’ll be hearing a lot more of that convenient argument between now and the election.)
Do you see why Sims wants to start a public debate? If this issue is left for the Treasurer and the big-business lobby to sort out behind closed doors, nothing will change.
