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Consumer the fall guy for strangled capitalism

By Greg Barns - posted Wednesday, 28 January 2009

The mooted return of large-scale government intervention in economic life, a knee-jerk reaction being promoted by politicians and anti-globalisation advocates against the failure of poorly regulated financial markets, will threaten the gains in wealth and consumer choice ordinary citizens in the developed world have enjoyed as a result of liberalised economies and societies.

Ironically, the policies of economic liberalisation, deregulation and privatisation that have served us so well over the past while, emerged as a necessary antidote to fixing the disease of statism that had its origins in the last great global economic crisis, the Great Depression of the 1930s. Government policy lurched from a laissez-faire approach prior to the 1930s to heavy intervention via subsidies, state ownership and regulating competition in response to the Depression.

At last October's G20 meeting, the chameleon French President Nicolas Sarkozy proclaimed the death of what he called "Anglo-Saxon capitalism". The French version, he declared was the solution to the current crisis. Mr Sarkozy, despite telling the French people in the run-up to last year's presidential election France could no longer afford its own heavily regulated and subsided economy, is the new darling of the economic left and the populist right-wing economic nationalists.


It is critical that Mr Sarkozy's "philosophical" outlook, and that of his supporters, not win the battle of ideas. It is not exaggerating to say that the global economy will strangle itself if it returns to the bad old days of heavy state regulation and intervention because powerful lobby groups, be they union, business, or environmental, will do what they used to do in spades - ensure that through their seducing politicians, Joe Public is ripped off through poor service, high prices and reduced income levels.

We are already witnessing a foretaste of what will happen if the death of free market economics is pronounced by organisations such as G20 or the US Congress. We have watched for weeks late last year the pathetic spectacle of the Detroit Three - car makers Ford, General Motors and Chrysler - running to Washington pleading for a taxpayer-funded bail-out.

The very same taxpayers have rejected cars and other products from these manufacturers because they, as consumers, prefer the more efficient and driver-friendly Toyota or Honda. They are now about to be financially punished through the tax system for daring to exercise that choice.

There is no doubt other industries and businesses are hiring lobbyists to press their case for "special assistance" in these times of crisis, and who are spreading falsehoods about their business being an integral part of the national interest and therefore worthy of government hand-outs.

Naturally, some politicians, such as Industry Minister Kim Carr, who is simply a loveable, jolly candy man for business and unions, will succumb to this spurious line of argument.

Politicians love nothing more than to present themselves as saviours of jobs and industries, and this economic crisis is a god-given, once-in-a-lifetime opportunity for many of them to make heroes of themselves. The green-tinged ones will want to create all manner of special lifelines for clean energy companies, while the unionists in the Labor Party will be escorting manufacturers to Mr Rudd's office so they can tell their tale of woe about how this is the greatest economic crisis since the Great Depression and therefore they need the Government to write them a cheque or two.


It is not as though what is happening now is somehow uncharted waters. One of the great economic scholars of the last century, the University of Maryland's Mancur Olson, wrote thousands of words on rent-seeking behaviour and how special pleading cripples society and hurts the average citizen, who has no organised voice in any seat of government.

If the current economic crisis means that large-scale government intervention in the marketplace becomes fashionable again, laws and regulations will be passed in the name of reining in "extreme capitalism", and the consumer will be the worse for it.

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First published in The Age on January 28, 2009.

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About the Author

Greg Barns is National President of the Australian Lawyers Alliance.

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