National Competition Policy: The miracle of the free market

It’s a paradox no one has yet solved for me. Acres of prosperity, yet we still have those who seemingly despise Australia’s micro-economic reform efforts.

Alas, the Productivity Commission’s current discussion draft on National Competition Policy (NCP) hasn’t improved on the situation. This is very disappointing, really. The Commission was instrumental in getting things rolling 30 years ago with debate on tariffs, but now can’t seem to find a happy ending for the miracle that is the free market.

Its report left me with the sense that those anxious about further change don’t know what is good for them. Apart from being divisive, this is theoretically flawed. Economics says the ultimate goal of reform - enhancement of community welfare - is the sum of each individual’s assessment of their own happiness.

If the true “measure” of policy performance is how people feel, how can we call it a success with so much apparent anguish? Has something been missed? Are the self-congratulatory testimonies of Australia’s economic triumphs for the doubters - or the “faithful”?

The Commission has failed because it fails to contend with such matters. While mapping out further change is absolutely necessary, it can also be an excuse for avoiding a more challenging read of reality.

Everyday, newspapers are packed with infrastructure-related dramas. Sydney commuters left on platforms. Electricity network failures in Queensland. The Victorian Premier in yet another dust-up over tolls roads and public private partnerships. Minister’s squabbling over water reform. And then there’s the “enfant terrible”, Telstra.

With the kafuffle, you’d think the Commission would be keen to revisit infrastructure operation, given its most significant policy influence over the last ten years has been NCP.

The discussion draft is a case study in the over-sensitive, “with-us-or-against-us” outlook that has over-run our policy debate. There is no deeper reflection on apparent criticism of free-market economics. Without this, there can be no heart-felt acceptance of the conflict and anxiety that has accompanied the reform of infrastructure and other sectors. The existing paradigm is a closed question. Hmmm … sounds familiar.

Why haven’t we arrived at the perfect world envisioned by economists? The implied answer is that ignorant and greedy types with vested interests, like unions and the Pharmacy Guild, have forced compromise upon weak governments. Likewise, infrastructure fiascos, burgeoning litigation and harassment by telemarketers - if admitted at all - are temporary glitches relating to the shortcomings of people. The model remains sound.

This insular and one-dimensional viewpoint is akin to suggesting men fly planes into buildings because they hate you. Even if true, it’s not at all helpful. Indeed, it is likely detrimental, as it provides an excuse to stop listening and to summarily dismiss calls for a more considered approach. Hmmm … sounds familiar.

Rather than using the apparent problems as a basis for delving further into the effectiveness of competition policy, the Commission has recommended more of the same. Other oppressed areas of the economy, like health care, water and natural resources, are to be “liberated” also. Now, this, I have definitely heard before.

It seems to be a curse: Mounting material success, attributable to positive reform, closes our minds to the possibility that those whining about further change have something credible to say.