Wednesday, February 10, 2016

Why big business has so much influence

According to the Labor Party's rising star, Senator Sam Dastyari, 10 big companies control our political process. They are the four big banks, three big mining companies, the two big grocery chains and the one big telco, Telstra.

The only surprise in that list was his third miner, not the foreign-owned Glencore Xstrata – to go with the foreign-owned BHP Billiton and Rio Tinto – but the largely Australian-owned Fortescue Metals.

I doubt it's quite that simple but, on the other hand, I doubt many people would believe me if I claimed that big business had no great influence on our politicians.

You don't need to look far to find evidence of the power wielded by "the big end of town".

Consider the fate of the mining tax. First Julia Gillard allowed the original big three miners to redesign the tax to their own satisfaction, hugely reducing its revenue-raising potential, then Tony Abbott abolished it.

Or consider the banks. Whenever they fail to pass on in full to home buyers a cut in the official interest rate, the pollies on both sides are loud in their condemnation. But they never actually do anything.

Since the global financial crisis they haven't been game to make the one big change we need, obliging the banks to choose between their government guarantees and their right to continue engaging in speculative market trading.

When the former Labor government responded to the various cases of bank-owned outfits giving appalling advice to small investors by tightening up the rules and limiting the use of commissions, first Labor toned down its investor protections in response to bank objections, then the incoming Coalition government attempted to tone them down a lot more.

And any number of farmers and small suppliers will tell you Woollies and Coles are allowed to get away with murder.

It's tempting to think the economy is controlled for the benefit of big business, not mere consumers.

But there are plenty of counter examples. Take Malcolm Turnbull's decision not to make changes to the goods and services tax.

Who do you think was pushing hardest for the GST to be raised? They hoped the proceeds would be used to cut the rate of company tax.

The point is that politicians survive only by getting enough votes, and each of us gets a vote but companies get none.

Turnbull turned away from the increased GST because he feared the economic benefits from a change wouldn't be sufficient to justify the risk of losing many votes.

But if politicians care ultimately only about votes, why are they so prone to accommodating the interests of big business? Because the two sides compete hard to attract votes during election campaigns using advertising, direct marketing and other expensive tools.

The parties need money to finance their campaigns, and big business and big unions are willing to supply it. Election campaigning has become a kind of arms race, where each side can never get enough. Give the parties public money to help with expenses and it doesn't satisfy them, it just moves the race to a higher level.

But does this mean businesses are attempting to buy influence with people in power? Does it mean the parties are effectively selling favours?

What an utterly offensive thing to say. Joe Hockey would be shocked. Businesses just want to support the democratic process. The parties are happy to take the money, but donors gain nothing in return.

Don't believe it? Neither does the Organisation for Economic Co-operation and Development. It says so in a new report, Financing Democracy: Funding of political parties and election campaigns and the risk of policy capture.

"Although money is necessary for political parties and candidates to operate and reach out to their voters, experience has shown that there is a real and present risk that some parties and candidates, once in office, will be more responsive to the interests of a particular group of donors rather than to the wider public interest," the report says.

"Donors may also expect a sort of 'reimbursement' for donations made during an election campaign and to benefit in future dealings with the respective public administration, for instance through public procurement or policies and regulations."

The report proposes a framework of items to avert the capture of government policy by interest groups. It advocates tight regulation of party donations, but warns that rules can be avoided by the use of "third-party" funding (interest groups in sympathy with, but not part of, particular parties) and other legislative loopholes.

It calls for a highly independent, well-resourced electoral authority with monitoring powers and the ability to impose sanctions ranging from fines and criminal charges to the power to confiscate illegal donations. Sounds a long way from our electoral commission.

It reported on political donations only last week. The donations it informed us of had been made up to 19 months earlier. Even so, the figures may not be complete. There is little penalty for late disclosure.
Parties are not required to disclose donations under $12,800, and buying a seat at a dinner table with a minister is not classed as a donation.

The OECD report says public reporting of donations should be timely, reliable, accessible and digitally searchable. Why? To make it easier for civil society groups and the media to be effective watchdogs.

Perhaps that's why we don't do it.