The Theory and Practice of Oligarchical Collectivism
When the government wants things, but doesn’t want to pay
|Stephen Kirchner||Feb 19|
When I worked for an industry association, one of the issues we had to deal with was the Australian government’s increasing unwillingness to pay for the regulatory outcomes it wanted. For example, the government wanted to give extra resources to ASIC, but was unwilling to pay for it out of general revenue. Its solution was to levy the regulated community for the cost of its own regulation.
There are many principled arguments to be made against industry funding, not least the extent to which it erected barriers to entry into the industry and reduced competition and innovation. It meant that the government no longer faced a budget constraint in relation to increased regulation. It also reduced the incentive for government to effectively oversight the regulator. You may have noticed that ASIC’s governance and performance has since become a significant problem for the government. ASIC routinely squanders its enforcement budget and disregards its obligation to be a model litigant. It thumbed it’s nose at the government’s Capability Review.
When we put the principled case against industry funding to the Treasury consultation on the funding model, the senior Treasury official leading the consultation advised that they were not interested in those arguments. The purpose of the consultation was to determine what shares regulated entities would pay. The official said words to the effect of ‘the government needs money and you are all very profitable.’
The same problem arose in relation to the regulation of foreign investment. The government wanted to significantly increase its regulation and enforcement of foreign investment rules, mainly for real estate transactions. But this was very expensive. The solution was to make foreign investors pay through application fees, raising yet another barrier to foreign investment. Foreign investors have money. They also don’t vote. You see the pattern.
Similarly with the media code. The government wants certain outcomes, but directly funding local media from the government’s balance sheet would give the game away. It would then be all too transparent that local media are wards of the state. Traditional media in Australia are a legacy of current and former government licencing regimes, media ownership rules and restrictions on foreign investment. The media is still a designated ‘sensitive’ sector, for which foreign ownership in excess of 5% requires approval from the Treasurer. If you want a short and colourful primer on how all that regulation worked, ask Kerry Packer:
Needless to say, Schumpeter’s gale has made short work of the ways in which Australian governments have traditionally sought to control the media and the media have in turn sought to control them. Technological innovation has led to outcomes the government and traditional media incumbents do not like. The incumbents need money. Who’s got some?
You might have noticed a slight disconnect between local and foreign media coverage of the Australian government’s media code. We have previously noted how the FT editorialised against it. In contrast to the local coverage, the FT’s coverage of Facebook and Google’s actions is remarkable clear-eyed:
You won’t read many of these arguments in the Australian media, which kind of undermines the notion that traditional media are uniquely placed to protect us against fake news and hold governments accountable.
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