In the past, open market Capitalism was the espoused model for facilitation of growth, personal betterment, societal progress and company profits … and therefore global prosperity through economic stimulation …

Contemporary economics seems to offer evidence of an altered state … and I am predicting that the lobbying from big business over the next few decades will outwardly appear to be of a more socialist flavour than has been the case for the past few decades.

Here is why.

It’s like this …

OVER THE PAST 50 YEARS (or so) the open market economic model has been all about private enterprise operating in an environment where many government enterprises and government employees created infrastructure that would facilitate business in an open market. Examples are: Roads. Power. Water. Rail. Ports. Sometimes referred to as utilities. Suppliers of goods and services that were for various reasons deemed as things which should be government controlled (whether it be due to reasons called ‘national security’ or due to the massive expense required for sophisticated national infrastructure). That sort of stuff.

In many countries boasting free market economies (Australia included) there were also government owned Banks, Postal Services, Insurers etc … taxpayer subsidised, of course.

The fundamental theory was that business would make profit from providing good and services, and the government would provide the infrastructure as a sort of conduit through which these businesses could generate profit. Businesses could go about conducting the business of making a profit (employing people, providing goods and services etc …) without taking on the huge levels of debt to build and maintain national infrastructure, which would hobble, cripple and/or stagnate business and the free market model.

Government enterprises would be supported and renewed through income streams including:

  1. Companies paying the tariffs for the services provided by the (arguably; often inefficient and often subsidised) government institutions.
  2. Income tax revenue from all employees of government and private enterprise.
  3. Tax on company / business profits (facilitated by government subsidised / supplied infrastructure).
  4. Tax revenues from the economic ‘churn’ (sales tax, GST, business profits, income tax from employees due to economic churn, the churn from the spending of wages, etc…).

Business derived benefit from this system through access to (albeit arguably inefficient) subsidised utilities, the additional spending power of greater level of employment – due to the employment of an arguably inefficient workforce in the government subsidised enterprises … plus the flow-on benefits of having access to functioning public transport systems, reasonable roads, reliable electricity and gas, operative ports etc … all subsidised by the taxpayer.

As a more refined version of open market capitalism swept the globe, such government enterprises were rounded up and caged … to become deleted items at an appropriate time. Private enterprise was appointed to take over from the inefficiently run government subsidised enterprises. Private enterprise would ensure efficiency, competition and quality – at much lower prices. After all, that’s the philosophy that underpins the free market.

The key to a market economy is competition. Once competition is controlled, through the domination of the market place in the form of a monopoly or an oligopoly, the foundation of the free market model is compromised. What remains is a living-dead free market zombie … it looks like a free market economy, but the mission is to infect everyone with the notion that everything is ok … so join us… and together we will conquer the world.

So what started as a brilliant concept (free market capitalism) turned out to be ‘The White Elephant In The Room’. Sorry to mix a metaphor – they both fit and are both spot-on. The free market economy has turned out to be a white elephant … and nobody wants to mention it (credit where it’s due: thanks Johanna for the latest mixed metaphor / cliché … I love it).

THE NEW PARADIGM (is anyone else sick of those words?) is a completely different ball game.

We arrived at our current economic location through the maturation and overwhelming success of the capitalist free market system. Victory goes to the proponents of private enterprise and market forces – aided and abetted by their corrupt and contemptible puppets in public office.

So resounding and complete has been the triumph of capitalism that the pitfalls of the system are now becoming embarrassingly apparent. The philosophical foundations of market forces were supposed to ensure increase (or at worst, a continuation of) competition through constant market entry by small / emergent players … because opportunity theoretically exists in the market for new players. This has turned out to not be the case. The capitalism we see has no room for emergent small players. The big monopolies and oligopolies control the market through overwhelming market share. New players are either bought out or sent broke.

Another free market myth that is busted: ‘to become a dominant business you have to be great at what you do’. Utter bullshit. The influence and effect of advertising, marketing and branding is so complete that you could argue that the consumer only has themselves to blame. But the consumer has a two-reason get-out-clause …

Firstly, in a situation of brand domination / reduced competition, there is a distinct and significant competitive advantage to any significantly established businesses/brands with regard to manufacturing, transport infrastructure and retailers. In fact, pressure can be applied by dominating businesses/brands on the retailers, transporters and manufacturers to make market entry by potential competitors a virtual impossibility. There are numerous documented examples of this precise practice – and undoubtedly many more that have not been recorded. The upshot at the consumer level, is that you become accustomed/trained to the brand … so regardless of your satisfaction with the product, or your idealogical opposition to the representation of the brand, you are effectively without choice (other than abstinence). There are plenty of examples of anti-trust and predatory behaviour that have been the subject of litigation and fines. Go and search the net – you’ll see the big names and the big fines and very little changing for the consumer – which goes to support my point!

Secondly, the influence of dominant businesses on governments has provided a conspiratorial advantage to these businesses. Whether it be through lobbyists and political donations, or via the less questionable channel of national economic interest / management, the net result is of benefit to the current big market participants and a dis-incentive for any potential competition … which is anti-capitalist in philosophy, but precisely what you get when you apply the realities over the doctrines. Arguably the end-game of open ended free market capitalism.

SO HOW IS SOCIALISM THE NEW CAPITALISM?

Listen.

The way forward may be an unexpected and seemingly obtuse political-twist.

THERE IS NO DENYING THE INFLUENCE OF BIG BUSINESS on the political landscape. Everything from influencing policy directions (obviously for the benefit of shareholders and directors) to political donations and positive political coverage (many argue that media owners – especially Rupert Murdoch – have significant influence in Australian politics – I do not dispute this assertion).

For much of the past 20-30 years, the desire of big business in Australia has been to ease the labour laws to the benefit of employers (be they retailers, wholesalers, manufacturers or tradies). That’s where all the “institutes” and “think tanks” come from. They are the champions of the capitalist cause masquerading as “independent research” and “policy direction advisory facilities” (sounds as though Kevin Rudd named them!).

So what happens if the economy tightens to an extent that big business comes to rely more heavily on government expenditure for profits and dividends. Will that really mean a new paradigm?

Socialist as the New Capitalist. Hopefully you are still following my argument … the rest is pretty easy … here goes …

Once upon a time (although not so very long ago) many Australians were employed by the various Federal, State and Local governments to:

  1. Build and maintain roads; create water and power infrastructure; supply water and power to Australian households and businesses.
  2. Build, maintain and staff Public Transport infrastructure and services.
  3. Supply Banking services.
  4. Supply Insurance services.
  5. Build, maintain, staff and provide HealthCare services and infrastructure.
  6. Build, maintain, staff and provide Education services and infrastructure.

This list used to constitute much of the spend of taxation revenue in Australia. Although there were regular “issues” with “efficiencies” in such government systems, the majority of the money spent on such projects went firstly through the usual community economic “churn” before making it’s way either back to either the government (via tax – most forms of tax … you could argue stamp duty, gst, income tax, company tax, plus revenues earned by the government sponsored provision of services eg. Bank fees, power bills etc..) or to businesses (via the spending of profits / income / wages, and the spending by recipients of government assistance).

Recent trends and influences have been for the reduction in overall “government spending” in every way (sometimes even a reduction in Defence Spending – who would have thought!).

This is tricky language: governments seem to continually spend more than ever. The difference is that the capital works and utilities are privately contracted or owned. Government regularly contract public works out to private enterprise. The money is drawn out of the system much sooner as big business profits … far less community “churn” than has been the case in the past … a famine in the staple diet of much of middle Australia – especially in regional and rural Australia where we are all pretty much ‘middle Australia’. Multi-nationals bring in their workers, their food, their accomodation … fly in and fly out … regional and rural Australia end up with more trucks on the road; more polution in the air, water and land; and little net else.

The profits leave the system earlier for a couple of reasons.

  1. Big business is all about maximising profit – so they aspire to pay less money for greater productivity. That means lower or fewer wages being paid. Potentially a smaller workforce and less money entering the churn economy.
  2. Capital works and the maintenance of infrastructure is undertaken to a minimal degree (again, to increase annual profits). We have already seen examples of private companies taking over public transport networks and crying poor when infrastructure maintenance or development is required … so the taxpayer kicks in (ironically, primarily to the benefit of the free market capitalists business). If it were an individual buying a house you would be told you should have done ‘due diligence’ … but not a shareholder owned company … the taxpayer can cover that!

As a matter of fact, business has become so efficient at extracting wealth from the free enterprise capitalist market system, it is doing itself a dis-service.

I’m sounding dangerously like a xenophobic and a nationalist. Of which I am neither. I am accepting of Big Business cleaning up at the end of the day … I am a beneficiary of the system as much as the three of you who read this are … but the free market capitalist system has matured fully … to a series or oligopolies … and the occasional monopoly. And as a result, wealth and money is so efficiently and so immediately removed from the system, that we’re choking off a little too tightly on small business and community. To our ultimate detriment – even if we happen to own fully-franked dividend-paying shares in the companies stripping the profits straight out. And we do so willingly (see the essay on Superannuation for more on this topic). But it cant last.

So in a time of economic contraction, if the money can go through the community a few more “churns” before being collected in the inevitable multi-national sweep, we might be able to live a little better a little longer. It’s the ultimately same amount (potentially less) money that the government spends … it just enters the system at a deeper point and (hopefully) has to go through more hands before bubbling to the top.

To achieve this, the governments can employ more workers for capital works. Dont contract it out – make the projects government owned and controlled. The inefficiencies actually assist communities and the economy; and the money still floats to the same organisations … just more slowly. You might even save more in government benefits than it costs (especially if you care to look at the ancillary savings: general healthcare, unemployment benefits, mental health costs etc …) derived from a more stable workforce.

THERE IS A PROBLEM WITH THE WORN-OUT POLITICAL SPIN associated with government funded capital works and publicly owned enterprises. For decades the mantra has been “smaller government is better government” – as though it’s a bad thing to run something inefficiently. But as brothers Gershwin insisted (George and Ira, often accompanied in spirit by Mother): “it ain’t necessarily so”. And the Gershwins (and Mother) are absolutely correct. The inefficiencies of government undertakings run into millions of dollars churning through the communities of Australia. Managed well, this could amount to a bright new beacon to follow in the gathering economic global gloom.

The challenge that then exists is – how does one go about becoming the representative of any electorate in Australia by promising to spend more on capital works and government enterprises … to resuscitate some dead and revive some dying formerly public services? Promise to make government bigger? Not a likely candidate for a winning position in the current mainstream media climate. The message has been over-worked and the public worked-over.

Ultimately however, that is the direction we’ll have to go. Seemingly back in time, to a place where a less streamlined removal of the funds that circulate the community is the norm. Because ultimately, it is in the best interests of ALL players and parties that this be our trajectory. Perhaps dividends on the portfolio might be marginally smaller, and maybe the share price will soften a little, but a relative sanity and safety should prevail.

The nuance of this progression is that a more socialist political model may be adopted. If the money ends up in the same place, and the value of everything along the way is increased, then the beneficiary, as I said before, is EVERYONE. Imagine a left leaning party being the darling of the mainstream media. Sounds preposterous right now, but I’m picking that this is our future direction. And in the political void that is our current ‘community conscious’ area of politics, wouldn’t you be proud as a member of regional and rural Australia to be those demanding a change of perspective?

PEOPLE VISITING REGIONAL AND RURAL AUSTRALIA remark that the experience is in some ways like going back in time. This is usually delivered in a quite complimentary context … referring to hospitality, community connection, community support structures, club sport etc. Sometimes the exact same words are delivered as a criticism … a shortage of art and culture; slowly delivered or the absence of certain services and goods; shorter shop opening / trading hours etc.

I propose that those visiting regional and rural Australia are visiting the future … what’s-more, a better future … for pretty much all of the reasons – the complimentary and the critical – above. Additionally, I propose we take all of those observations as compliments. There is a quality of life that exists in regional and rural Australia that defies replication in the cities and suburbs. There are exceptional communities contained within some cities – however they appear to me to be almost as much a ‘cult’ as they do a community. The inclusive accepting welcome of ‘all comers’ and ‘new members’ – something you regularly find in regional and rural Australian communities – is the missing ingredient. The city manifestations of community always appear to me to be restrictive in access … which lies somewhat outside the definition of community as we apply it here in the regional and rural Australia … and may it always be so.