I’m sure, many would have read the economist Mancur Olsen’s “the Rise and Decline of Nations”.
A must read for economists during the ‘80s.- it certainly influenced my thinking. Essentially, Olsen described the process of social decay resulting from what he termed “institutional sclerosis”. He observed that stable political democracies, through the process of evolution, establish strong networks of special interest groups and lobbying organisations which makes economies less dynamic and efficient. These sheltered rentier organisations try to pursue economic changes that coincide with their own self interests. Over time all institutions succumb to the power of such interest groups and cause great economic cost to the community as they reallocate wealth towards themselves. This phenomenon now provides the generally accepted backdrop or context to much of the economic/political analysis we see today: The Government created National Covid Coordination Commission (NCCC) fits the mould and looks very comfortable in this environment of rentier self-interests.
Before we examine this prospective planning body, we should note that this is the first serious economic initiative of the Government in our supposedly changed world. Remember? In the early days of the pandemic we thought the world would change forever – a ‘new’ normal, greater government intervention, etc, – unfortunately, however, facts don’t change ideologues. This government’s penchant for crony capitalism is insatiable. Research indicates that Australia is the rent-seeking “capital” of the Western world, so we should not be surprised that the Commission is busily laying the groundwork for more of the same.
The Commission was created in shroud of secrecy, primarily from a cabal of gas and mining lobbyists. Neville Power, ex mining CEO from Fortescue Metals, board member of Strike Energy (WA), was hand-picked by the PM to lead the Commission with the broad objective of “mobilising a whole-of-society effort” essentially to develop a national economic recovery plan. The process by which the other NCCC members found a seat at the table still remains a mystery. Additionally, we have the ‘appendages’ – the appointed advisors to the Commission. One such influential adviser is Andrew Liveris, ex Dow Chemicals, now on the board of the Saudi petroleum giant Aramco.
Like its initial creation, the work of the Commission has proved remarkably opaque. Apart from a rather problematic senate inquiry, public information regarding the Commission’s operation has been in short supply. Under the rather vapid expression ‘getting the economy running again’ Power managed to say that climate change is irrelevant to an economy recovery and we should deal with that issue post-Covid.
What actually is ‘the’ favoured economic recovery plan? The options are many but the Government is focussed on gas and associated infrastructure. Given our major short-term issue is job creation and major longer-term is climate change, to allocate recovery funds to gas makes absolutely no sense. Even in more normal times it would be economically stupid on a multiple of grounds.
The reasons for this are largely self-evident –
- Governments “picking winners” – traditionally, a process ideologically toxic for conservative governments. Although industry policy is now making comeback in developing countries, this is a prime example of the infamous Morrison hypocrisy.
- Currently there is a major global gas glut – expected to last at least to 2030. Due to this massive oversupply, gas and LNG prices have bottomed except in Australia where this government has given local LNG producers unrestricted rights to export – leaving Australian consumers under supplied and overpriced, essentially subsidising the international market
- In terms of employment, the gas oil extraction industry employs less than 0.2 of the Australian workforce. Investing recovery funds in almost any other industry would create more jobs.
- Such gas projects are a waste of public money leading inevitably to stranded assets
- It runs counter to our longer-term climate change goal by diminishing both the focus and funds devoted to renewables and gas is a spurious substitute for coal in terms of carbon emissions.
The Commission has delivered advice to the Morrison government without being subject to public scrutiny and has repeatedly refused to fulfil requests for documentation to be released publicly under freedom of information laws. Note that much of what is known about the recommendations being given to the Morrison cabinet have come by way of leaked documents
Morrison has, sneakily, sought to further reduce any scrutiny by bringing the Commission within the deliberative processes of the federal cabinet and reporting directly to prime minister Morrison, further protecting its operations from FOI laws.
And further, that a gas executive is reporting directly to the Prime Minister should be deeply troubling. It shows an arrogance and complete disregard for normal democratic checks and balances associated with honest governance.
Given these many valid reasons for not proceeding with a gas-led recovery plan, one can only conclude that this proposal is simply a rort for rent seekers and ideological supporters – masked by an expensive and flawed recovery spending policy.
It seems that Mancur Olsen – almost 40 years ago – got it right!
The views and opinions expressed here are solely those of the author.