Monday, October 20, 2014
The difference turns on whether the pollies want markets where effective competition ensures benefits to consumers are maximised and excessive profits minimised, or markets where government intervenes to limit competition - often under the cover of claiming to be protecting jobs - and makes life easier for favoured businesses.
Will we see more rent-seeking or less under Abbott, more of what The Economist calls "crony capitalism"?
Will firms or industries with rival interests do better from government regulation if they're more generous donors to party coffers?
Abbott and his ministers' intemperate attacks on the Australian National University for its decision to "divest" itself of a few million mining company shares for environmental or ethical reasons are a worrying sign.
Investors shouldn't enjoy freedom to choose where they invest, regardless of their reasons? ANU is different from the rest of us even though its investment funds come largely from private donations and bequests? This from a government keen to complete the de facto privatisation of universities?
What is ANU's offence? Bringing ethical considerations into investment? Or sounding like it believes climate change is real and we should be doing something real about it?
Abbott attacked ANU's decision as "stupid" and believes "coal is good for humanity, coal is good for prosperity, coal is an essential part of our economic future".
If ever there was an industry whose early decline could be confidently predicted - as it is being by hard-headed investors and bankers the world over - it's steaming coal.
Yet Abbott seems keen to change the rules of the formerly supposed bipartisan renewable energy target in ways that, by breaking long-standing commitments to the renewables industry, would cost it billions and blight the future of its employees, all to provide the government's coal and electricity industry mates with temporary relief from the inevitable.
The biggest problem with governments "picking winners" is that they quickly regress to picking losers, helping industries against which technology and other forces have shifted to resist the market's pressure for change that would - almost invariably - make consumers and the economy better off.
The proposals of the recent draft report of Professor Ian Harper's competition policy review could do much to strengthen the market's ability to deliver benefits to consumers and roll back decades of accumulated rent-seeking and crony capitalism.
The enthusiasm with which the Abbott government takes up those proposals will tell us much about its choice between being pro market forces or pro certain generous business donors to party funds.
A particular area where sound competitive principles have been secondary to special pleading from various interests is the regulation of intellectual property, such as patents, copyright, trademarks and plant breeder rights. Harper says our intellectual property regime is a priority for review.
IP isn't God-given, it's a government intervention in the market to limit competition with owners of the patents and so forth for a limited period. It's a response to market failure where the "public goods" characteristics of IP would otherwise generate too little monetary incentive for people to come up with the new knowledge and ideas that benefit us all.
In other words, it's a delicate trade-off between government-granted monopolies to encourage innovation, and competition to keep prices and excess profits down.
This makes it ripe for rent-seeking: pressuring politicians to extend the monopoly periods retrospectively (despite the lack of public benefit), to allow loopholes that permit phoney "ever-greening" of drug patents that would otherwise expire, to limit poor countries' access to life-saving drugs at realistic prices and to ignore blatant gaming of IP laws by two-bit operators that have never created anything.
Most of these excesses are at their worst in the United States with its easily bought legislature. The information revolution has made IP one of America's chief export earners. And the free-trade preaching Yanks have made advancing the interest of their IP exporters their chief priority in trade negotiations such as the present Trans Pacific Partnership deal.
As always, we have a tendency to give the Yanks whatever they want. Trouble is, as Harper points out, Australia is and always will be (and should be, given our comparative advantage in world trade) a net importer of intellectual property.
Abbott has a further temptation to be less than vigilant in pursuing Team Australia's best interests: his chief media cheerleader, News Corp, happens to be the twin brother of a primary beneficiary of the Yanks' efforts to advance the interests of their IP exporters, 21st Century Fox.