Business gets its absolutes out of order

Every age has its own taste in heroes, reflecting its particular values and obsessions. In the past, Australia has venerated everything from saints to generals to the odd racehorse. Today, our hero seems to be business. Our governments are urged towards best business practice, our football clubs are run as businesses and our universities are told to adopt business models. Christ will arrive for the second coming with a team of chartered accountants.

The evident assumption is that business knows best about everything, from making widgets to efficient foreplay. Which is why it is so fascinating when business gets something miserably wrong, and in the process exposes its own narrow assumptions and understandings.

A pungent present example is federalism. Led by the Business Council of Australia, the commercial clans have had the states under siege for some time.

They are deeply frustrated by the perceived inefficiencies of divided power and long for an Australia where the states are the merest bellboys of Canberra.

A recent closed session on federalism conducted by the BCA in Sydney made this preference crystal clear. The three options on the table were the existing degree of centralism, more centralism or a whole lot more centralism. Any tendency towards devolution was met with a curious mixture of humorous disdain and suppressed irritation.

Yet the central feature of this push is the utter ignorance of many businesspeople concerning the most basic issues of federalism, or constitutional design generally. Too often, listening to the corporate world critique political arrangements is like watching a very confident group of brain surgeons trying to plumb a bathroom.

To take the most obvious tendency, the corporate world prevalently assumes that the only object of constitutional arrangements is efficiency. So long as the trains run on time and the drains are unclogged, the Australian Constitution is functioning well.

The grim reality, however, is that some things are even more important than commercial efficiency. One of these is the assurance of liberty. A constitution that maximises profits but fails to protect freedom is no good bargain.

This is where business simply misses the point about federalism. Of course it contains frustrating inefficiencies: so does its close cousin, democracy. But those inefficiencies flow directly from its division of power between governments, which is Australia's greatest guarantee against the emergence of unrestrained, overweening, arbitrary power.

It is well worth pondering the exact implications for business of the overwhelmingly powerful national government that it so ardently desires. True, as Mussolini might have remarked, life would be simpler. There would be fewer sets of regulations and fewer regulatory conflicts. But would business find this brave new order congenial?

To begin with, it would discover that there is no necessary correlation between unitary government and good government. In fact, the reverse can be true. A policy mistake in one state is a local mishap, whereas a failure in cohesive national policy is a universal disaster.

Take school education. If business is worried about the quality of education in one or two of the states, how would it feel about comprehensive meltdown under a single national curriculum? Nationwide coverage is no guarantee of educational quality: just ask the Brits. The same applies to any other policy area, from transport to health.

Critically, of all sectors of the community, business surely has the greatest reason to fear centralised power. By definition, powerful government is ambitious government and ambitious government is big government. The less restrained an Australian government became, the greater would be its temptation to regulate all inconvenient aspects of life, including those relating to business.

In this context, one perceives the delicious irony of the turkeys voting for an early Christmas. In its headlong pursuit of an increasingly centralised Australia, business is attempting to create the ideal conditions for its own future constraint and regulation.

History provides some interesting insights here. After all, it was a national government which in the 1940s attempted the decidedly business-unfriendly manoeuvre of nationalising the banks. What stopped it? The Chifley Government was defeated by the federalism of the Australian Constitution, which denied it the necessary power.

The reaction by those such as the BCA to this sort of argument tends to be twofold. Some of our corporate reformers seem not even to have heard of the Chifley Government. Those who have reply condescendingly that those days are past and that in a globalised world no future Australian government would dare assault its business community.

There is a wealth of naivety in this position. It is based on a Fukuyama-like confidence that in the free-market philosophy of the early 21st century, Australia has reached the endpoint in its economic and political development.

The reality is that there is nothing as fluid as politics. Any number of events from catastrophic terrorism to natural disaster to unforeseen economic collapse could produce fundamental change in the types of government seated in Canberra. In a world that did not foresee the fall of communism or the rise of jihadism, how can our business leaders be so confident that neither Chifley nor Whitlam will ride again?

One thing is absolutely certain. Were a monolithic commonwealth to turn on its erstwhile business allies, it would be too late to devise new strategies for the division of power. Power must be divided in anticipation of its misuse, not afterwards.