The principles that The Australian Financial Review has argued for over the decades are once again under threat.
Last week’s celebration of the Financial Review’s 70th anniversary invites a reflection on the newspaper’s enduring economic philosophy. Its advocacy of the open, competitive economy is as valid and relevant today as it was all those years ago.
Yet, as was the case in the early post-war decades, openness and competitiveness are again under pressure. The founders of the rules-based international trading system in 1948 sought to prevent a third world war by facilitating trade between nations, integrating them in peaceful coexistence through voluntary interdependence.
By 1995, when the World Trade Organization (WTO) was established as the successor to the General Agreement on Tariffs and Trade (GATT), membership of the rules-based system had expanded from the original 29 countries to 112 countries.
Absent, however, were China and Russia. China joined in 2001 and Russia in 2012, becoming the WTO’s 156th member. Australia was among the last countries to agree to Russia’s accession – because as trade minister I was opposed to a deal the US had done with Russia for preferential American access to its market for high-quality beef. The side-deal was undone, and Russia joined the WTO.
After decades of protectionism, Australia began embracing the open, competitive model, initially through the Whitlam government’s 25 per cent across-the-board tariff cut, but comprehensively through the Hawke-Keating governments’ tariff reductions and the elimination of import quotas.
The Howard Government finalised the process by reducing tariffs to no more than 5 per cent and in many cases to zero.
Throughout this era, the Financial Review supported the creation of Australia’s open, competitive economy. In Bob Hawke’s office we welcomed the many supportive columns of a bespectacled and slightly younger Michael Stutchbury when many in the media attacked Labor’s reform program.
But now the open, competitive model is under renewed pressure. Geopolitical tensions between the west and Russia and China, the emergence of Trumpism in the US, the dysfunctionality of the WTO and the clamour for economic sovereignty created by the COVID-19 pandemic threaten a retreat to protectionism.
Thus far, the retreat is taking the form of government subsidies for businesses. Frankly, the proposition that ministers or staffers in ministerial offices are smarter than the market in allocating scarce resources is absurd.
There is a role for government in circumstances of genuine market failure, such as research and development where business initiators are unable to capture all the benefits of the activity and therefore will under-provide it. But decisions on which proposals to fund and which to reject should be made by qualified officials operating at arm’s length from politically motivated ministers.
The decision of a Morrison government minister, Stuart Robert, to block university research projects with which he personally disagreed https://www.afr.com/policy/health-and-education/politicisation-of-research-grants-beggars-belief-20211226-p59k6j has set a shocking precedent. Vetoing research projects that don’t accord with the political philosophy of the government is Stalinist, a repudiation of liberalism.
While sovereign capability is an understandable sentiment in an era of geopolitical tensions and a global pandemic, it should not be used as a pretext for new protectionism and an excuse for governments spending taxpayers’ money on projects for the primary purpose of increasing their chances of re-election.
While the Financial Review through the years has been pro-business it has understood the difference between being pro-business and pro-competition. Big money can be made from anti-competitive behaviour, but the Financial Review has supported pro-competitive reforms such as the Australian Competition and Consumer Law.
Nor has the Financial Review considered climate change to be a left-wing conspiracy to destroy the capitalist system. Its new series on the opportunities for Australia arising from the transition to a low-carbon future is testament to its interest in analysis over party-political ideology.
The open, competitive journey with the Financial Review has had a few potholes. The Financial Review has been troubled by trade unionism and compulsory superannuation.
Unless the benefits of productivity-raising economic reforms are shared fairly, workers’ interest in and tolerance of reforms will evaporate. As became clear with WorkChoices, fair sharing is not a feature in a system dominated by individual contracts.
Compulsory superannuation relieves a lot of pressure on the taxpayer-funded age pension. As Australia’s population continues to age, the sharply increasing number of age pensioners in the absence of compulsory superannuation would become an irresistible lobby group. These voters would demand and receive large increases in the age pension, necessitating large tax increases.
Where policy disagreements with the Financial Review exist, they are tolerated not suppressed. This tolerance of well-considered alternative views is perhaps the Financial Review’s greatest strength. It has no interest in the culture wars or barring progressive thinkers from its pages and condemning them as ‘woke’.
That the Financial Review’s birthday dinner was attended by three former Liberal and Labor prime ministers, two former treasurers, a treasurer and a shadow treasurer, along with the present and former Reserve Bank governors, business leaders and senior government officials, says much of the respect the newspaper has earned over its 70 years. In a troubled world, the Financial Review will be relied upon again to support and defend the open, competitive model.
Craig Emerson is managing director of Emerson Economics. He is director of the APEC Study Centre at RMIT University, visiting fellow at the ANU and adjunct professor at Victoria University’s College of Business.