No. 126

Protecting the Productivity Commission

STONE the crows! It is easy to understand why Labor wonders whether it needs the Greens – the party has its own in-house enemies of the market economy.

On Friday the comrades got stuck into Productivity Commission chief Gary Banks for suggesting greater scrutiny of anti-competitive unions and labour market restrictions.[i]

Workplace Relations minister Bill Shorten ruled the idea out. Sundry union leaders denounced Mr Banks and Senator Doug Cameron called for the Commission’s abolition. “There are many other areas of truly independent and non-ideological advice that the government should seek,” he said. [ii]

Gosh, the Crows must have missed them because, from their birds-eye view, the PC stands all but alone as an institution taking on rent-seekers across all areas of the economy.

You can argue with the PCs reform proposals – some of which are as impenetrable as its prose – but it stands all but alone in illuminating special interest pleading across the economy.

Not that its opponents ever acknowledge it.

Minister Shorten was careful to call Banks “a respected participant in our national economic debate”, last week, before politely suggesting that only Gradgrinds go for deregulation:

Labour market regulation exists to provide safeguards to ensure there is not a race to the bottom on wages and conditions. We shall never let the Australian workforce suffer unbridled exposure to dystopian market theory.

The bottom line is that people are not products. [iii]

Well-spotted minister.

The trouble is that people consume products and highly regulated industries, staffed by well-paid workers, generally charge high prices, paid by everybody, including men and women who earn less than protected unionists. It was once the universal Australian way.

As Saul Eslake put it last year:

Protectionism forced Australian consumers to pay higher prices than they would otherwise have done, for a narrower range of what were often poor-quality goods, in the name of “protecting” jobs (at what were often foreign-owned businesses) and of ensuring that Australia “made things”. [iv]

The Commission’s role has changed in line with the economy – it now emphasises services – but the bottom line remains the same, pointing out what concessions for special interests cost consumers:

The key role of the Productivity Commission has not changed from that of its predecessors — put simply, it is ‘to help govern­ments make better policies for the benefit of the Australian community’. As in the past, the Commission’s niche remains in those areas of public policy where reform is difficult but the potential payoffs are large. [v]

This inevitably makes the PC unpopular. Industry minister Kim Carr did his best to deal it out of the policy game, establishing his own review of the car industry with terms of reference that excluded the functions the Commission exists to undertake:

Answering today’s challenges and seizing tomorrow’s opportunities will require new ideas and new policies. That’s why we’ve been talking about the need for a new partnership between government and the sector to attract new investment and to secure the jobs, the innovation, the technical skills which are driven by this critical industry.[vi]

And Kim Carr made it clear that the Commission could not be trusted, what with the way it asked difficult questions about pet political plans, the green car innovation fund for example:

It did so without any modeling, without any advice from my department, from me. It has not had any advice from the Government: how that fund will operate. It said to the estimates committee just last night that these were questions that it raised.[vii]

Which was polite way of saying the pointy-heads should piss off and stop pointing out the politically problematic.

’Twas ever thus. In fact things are much better than they were in the 1960s when the then Tariff Board faced a protectionist coalition led by trade minister Jack McEwen.[viii]

The market-based economics which is the foundation of the Commission’s approach was once an eccentric interest of economists and the occasional maverick MP.

And that is what it would have stayed if the high-spending and regulating state had not unravelled in the 1970s when unemployment, stagflation and unsustainable government outlays crippled the social democrat model in the US, UK and Australia.[ix]

What Senator Cameron implies is ideology is simply a common sense alternative to a discredited tax and spend system. To ensure efficiencies instead of rent seeking and patronage must remain the basis of regulation

To ensure Australia does not revert to the old regime where a minority of organisations and their employees are protected at the expense of everybody else the PC needs, well, protection.

ENDNOTES


[i] Ben Packham, “Labor rejects Productivity Commission head Gary Banks’s workplace challenge,” The Australian, July 13

[ii] Joe Kelly and David Uren, “Cameron lambasts Banks’s speech, The Australian, July 14

[iii] Bill Shorten, “Labor will always provide safeguards for workers,” July 13 @ http://billshorten.com.au/labor_will_always_provide_safeguards_forworkers

[iv] Saul Eslake, “Return of protectionism,” The Age August 31 2011

[v] Margot Hone, From Industry Assistance to Productivity: 30 years of ‘the Commission,” (Productivity Commission, 2003) 136

[vi] Kim Carr, “Transcript: Automotive Industry Review Report Release,” August 15 2008 @  http://archive.innovation.gov.au/ministersarchive2011/carr/Transcripts/Pages/AUTOMOTIVEINDUSTRYREVIEWREPORTRELEASE.html

recovered on July 15

[vii] Kim Carr, interviewed by Kathy Bowlen, Victoria Stateline, July 6 2008, @ http://www.abc.net.au/stateline/vic/content/2006/s2267636.html recovered on July 15

[viii] Hone, op cit 12

[ix] Daniel Stedman Jones, Masters of the Universe: Hayek, Friedman and the birth of neoliberal politics (Princeton, 2012) 215

'2012