Australia — a banana republic in the grip of crony capitalism

Crony capitalism noun (derogatory): an economic system characterised by mutually beneficial relationships between politicians and business owners. Collins Dictionary.

That getting rich in Australia is mostly about working your political connections in heavily regulated industries like mining, property development and finance has been known for quite a while. Cameron Murray and Paul Frijters explained how in the excellent Game of Mates.

If anything, however, the extraordinary extent to which the Australian economy is centred on favours for the well-connected is only becoming greater, particularly under Scott Morrison.

Morrison, after all, began his prime ministership saying: “My value is: we look after our mates.” If nothing else he’s lived up to that.

This week’s energy policy announcement, centring on a commitment to build an unnecessary power plant and pipeline infrastructure to boost gas consumption, continues Morrison’s pattern of rewarding major political donors Santos and Origin Energy. Those companies are also boosters of the fossil-fuel industry’s carbon capture and storage scam, which the government is announcing handouts for today.

But Australia’s economy is littered with examples of the same forms of crony capitalism.

Media policy has always been the clearest form of crony capitalism in this country but it has become purified to an unprecedented level in the government’s extortion of Google and Facebook at the behest of News Corp, which literally dictated the legislation and the treasurer’s talking points.

Agriculture and water policy under the Coalition is almost as egregious, with massive handouts delivered to the agriculture industry (though never enough to satisfy its political representatives, the Nationals).

In its most recent review of taxpayer subsidies, the Productivity Commission (PC) reported that the government had increased handouts to farmers by more than $1 billion under the guise of drought relief, despite repeated warnings from both it and farming groups that such handouts rewarded inefficient and lazy farmers and punished those who had prepared properly for drought.

The latest win for agriculture is the announcement the government was abandoning altogether environmental water buybacks in favour of handouts to irrigators to upgrade their water infrastructure — despite years of advice from the PC that irrigation infrastructure investment was a far more expensive way to reduce water loss, and extensive evidence of water theft and rorting in the Murray-Darling Basin by irrigators.

National Party connections are also at the heart of one of the more blatant examples of crony capitalism during the pandemic: foreign-owned regional operator Rex Airlines, chaired by former Nationals transport minister John Sharp, received tens of millions in taxpayer handouts that other airlines couldn’t get.

Australian banks, big financial institutions and their customers still pay the price for another especially blatant form of crony capitalism — the long period in which the Liberal Party, in exchange for huge donations, protected the big banks and AMP from regulatory scrutiny and proper, customer-centred financial planning rules.

Unusually, this ended up blowing up in the faces of both parties, with the banks so egregiously abusing the privileges bought from the government that a political backlash resulted so violent as to force a whole new period of reregulation and industry restructuring.

The big banks have been replaced as major donors to both sides by the big four accounting firms, which enjoy hundreds of millions of dollars in government contracts, secured through a deliberate government strategy of cutting the public service and outsourcing policy work to the big four, who are even more pliable than bureaucrats.

If you’re not a mate, of course, and you don’t give generously to the Coalition, you can expect no favours. The government has used the pandemic to target the university sector and the much-hated industry super funds while sitting back and watching the arts sector expire.

Labor is gripped by its own form of crony capitalism. Key unions — which bring membership numbers and massive donations — heavily influence state and federal policy. The people of New South Wales and Queensland paid a heavy price for the role played by unions in blocking electricity privatisation in those states, leading to higher power bills and lower infrastructure investment in the name of preserving union featherbedding.

Unions are also behind the enthusiasm of state Labor governments for propping up inefficient, carbon-intensive sectors such as aluminium smelting, and costly local procurement requirements that inflate the cost of taxpayer-funded projects and services.

But under the current government, the Australian economy — always small, prone to oligopolies and special dealing enabled by an unregulated and opaque system of political influence-wielding — more than ever resembles a banana republic where the best way to make money is to befriend the ruling junta.