In support of free enterprise

In April 2001 CCIWA launched 'In Support of Free Enterprise', a paper which seeks to challenge the increasingly prevalent hostility to economic reform, free markets and business generally in Australian and wider political and economic debate.

It is paradoxical that the unparalleled prosperity delivered by economic reform over the past twenty years has been accompanied by a widespread flight from economic reality.

The recent downturn in GDP should not disguise the achievement of 37 successive quarters of positive economic growth up to September 2000 – a record unprecedented in the post-war period.

Over the longer term, virtually every measure of our well-being is improving – whether measured in narrow economic terms such as the purchasing power of income or the quantity of goods and services we each consume, or more broadly in terms of health and life expectancy, access to education and so on.

Yet recent election results seem to show that, in a significant portion of the electorate, there is a widespread feeling that the economic change which underpins this expansion is a threat to our security whether as individuals, as families, or as communities.

There is a widespread feeling that governments have for too long now been under the sway of faceless 'economic rationalists', and that reform has gone too far.

There is still a belief among the voters of regional, rural and outback Australia that they have been abandoned – by State and Federal governments, and by Corporate Australia – to an irreversible economic and social decline, losing both population and infrastructure.

There is, as well, a perception that the increased 'globalisation' of the world's economy is a threat to our economic and political sovereignty.

This economic insecurity is often backed up by a cultural and social insecurity, a strong belief that an authentic Australia has been abandoned to modish multiculturalism, usually coupled with a strong resistance to higher levels of immigration.

This phenomenon usually expresses itself in negatives, as being 'against' this or that. Insofar as it can be expressed in positives, it would seem to be 'for' a closed economy, and 'for' big and intrusive government. This is in itself another irony, since one of the sources of disenchantment is a loss of faith in politics, in politicians and their bureaucracies, and in the political process itself.

We begin the new century, then, with a paradox firmly established at the heart of Australia's political and economic life: as the benefits of the last twenty years of economic reform become more and more apparent, as both the nation and its citizens become steadily more wealthy, the constituency for reform is smaller and less secure than it ever was.

The general if unspoken consensus on the important point of economic growth provides a potential starting point for a clearer debate on these issues. With the exception of a very few ecological extremists, virtually all Australians realise that economic growth is the foundation on which each of us builds the future – and we want more of it.

And the key to sustaining and sustainable economic growth is a free market economy. No other economic system has proved as capable of providing the economic circumstances which allow us to build the future. The history of the modern West is an astonishing and unprecedented story of both wealth and freedom increasing and spreading to an extent once unimaginable. In a free enterprise economy, the production, distribution, pricing and consumption of goods and services are primarily determined by the choices of individuals, whether acting alone or through corporate entities.

Entrepreneurship, innovation and consumer choice ensure that scarce resources are continually employed in a manner which most effectively matches the changing wants and needs of society.

Competition ensures that goods and services are delivered as efficiently as possible, and provides a perpetual spur for innovation and improvements in quality, quantity and efficiency. Resources are directed toward their most effective uses.

Individuals are free to use their income and wealth in any way that they like, to choose to spend, save or give it away, as they prefer.

This is not to deny a role for government in the production and distribution of goods and services.

Governments should ensure the provision of public goods which the private sector would not deliver unprompted or would not deliver efficiently.

They have a role as regulators or service providers in markets which are unlikely to function efficiently in isolation, such as natural monopolies.

Governments in richer societies also ensure that a minimum standard of living is available for all their citizens, however contentious the determination of that minimum standard might be.

Some activities of government clearly enhance people's quality of life beyond what a market system alone might provide.

But the benefits which these government activities deliver do not constitute an argument against free markets, except perhaps against the most blinkered libertarianism.

In fact, the provision of public goods and a social safety net requires that governments have the resources which only a prosperous market-oriented economy can deliver.

It is also worth stressing what a free enterprise economy does not do, and countering some of the unfounded criticisms levelled at it.

It does not, as its critics sometimes claim, put the interests of businesses above those of consumers. On the contrary, free market policies in general, and competition policy in particular, are above all about putting the interests of the wider community above the special and powerful interest of producers and producer groups.

It does not protect and support the interests of big business. Rather, a competitive free market economy is the best restraint on the abuses of large and monopolistic enterprises, even the trans-national corporations so loathed by opponents of globalisation.

And it is not about connivance between businesses and politicians or bureaucrats in the name of a rationalist consensus. In fact, more than any other economic and political system, it rejects the tax breaks, corporate welfare, 'protective' regulations and other means by which business and government might collude to further the interests of business, usually at the expense of the wider community.

In a political environment where the very word 'rational' is becoming offensive, it may seem a lost cause for CCI to call for a reasoned debate about the desirable and feasible ends of economic policy, and the means of achieving them. But the economic and social cost to Australia if hostility to the free market is allowed to govern economic policy means that it is imperative to try.