ECONOMICS: by Dr Mark McGovernNews Weekly
Development Bank - a boost for regional enterprise
, November 17, 2001
The call by former ANZ Chief, Will Bailey, for the political parties to support a government inquiry into bank deregulation and the feasibility of establishing a new development bank, highlights the forgotten issue in the election campaign - the need for enterprise and regional development. These are the keys to prosperity, argues Dr Mark McGovern, Chair of the Rural Policy Institute and lecturer in the School of Marketing and International Business, Queensland University of Technology.Enterprise is being needlessly squandered and development held back in Australia today. Australian leaders are called upon to commit themselves to moving beyond today's "casino economy."
Advancing true Australian prosperity will require insightful and prudent enterprise, government and financial system management.
The era of competitiveness, and its recent offspring, National Competition Policy, is essentially over; but Australian political parties, and their advisers, apparently fail to see this. Fascination with markets has seen us surrender sense. Yet the renowned US economist Paul Krugman termed competitiveness a dangerous obsession.
We are now left with ever more wrecks - HIH, farms small and large, Ansett, small business and large mining companies, One.Tel and others yet to come. The enterprise failure rate is needlessly high, the damage excessive.
These are legacies of deregulation and the arrival of the casino economy.
Enterprising Australia is now balancing on the brink.
When a road train operator from Western Queensland can make more money mowing suburban lawns in Toowoomba, and when a skilled farmer can earn a better return on his capital wholesaling plastic, something is seriously wrong.
Much of rural Australia is surviving on three-year interest-only loans. They are treading water, not advancing. Where is their future, and that of the city and country businesses that service them?
Urban areas are dotted with young businesses blighted by unfair competition, and discriminated against by such things as higher borrowing rates and the disproportionate cost of GST administration.
The Productivity Commission reported whole regions discriminated against under National Competition Policy reforms. Nothing was done. Now the fiascos of dairy and airline deregulation can be added to the reform list. And still nothing is done.
Many enterprising Australians are heavily fatigued. They are also being ignored. Enterprise is under-rewarded, initiative needlessly risky. There will always be risks in business and in life - but why do we discriminate so much against the enterprising and the productive?
Who is addressing these concerns, and the losses they represent to our economy? Or the risks they could present for a banking system unable to tap good potential development yet possibly already facing billions in bad debts? Or for a society, facing dispirited alienation and pockets of hopelessness?
The "casino economy", with its focus on speculation, quickly depletes the reserves, especially when the small and the entrepreneurial must play at the expensive tables.
While some may hope for a market turnaround, the costs of delay are great. Regulators saving thousands and others "not wanting to intervene" have already imposed costs on us all totalling billions.
Check your new insurance premiums, for example. Then check your bank account and ask why one side can vary conditions and fees virtually at will. Then, have a drink of milk and ask why the price you pay for this and many other (GST-excepted) foods is little changed yet the price paid to many farmers has been savaged.
It is particularly those whose positions are marginal who deserve attention. Even where there are successes, gains are inhibited by a needlessly hostile and unsupportive environment.
These are the sorts of issues an incoming government needs to face.
Yet many in political life appear like croupiers in the "casino economy". They will take your bets, and happily smile as they pay the winners.Failed commitment
While they may say they have a plan or will personally chair a committee, things will really go nowhere until problems evident in the casino economy are properly addressed.
Many politicians may mean well, but their commitment fails to deliver unless they and their advisers move past the slogans.
For too long, common sense and sound business thinking have had to struggle against waves of hollow market hype and inappropriate institutional thinking.
Factual research and information has been ignored at the ongoing "competition convention" in Canberra, at great cost to enterprise, commerce and the country.
Many Australians are rediscovering the basis of a successful capitalist society, the prudent use of capital. Viable enterprises and sustainable regions are built on the prudent use of human, natural, physical and financial capitals.
Surprisingly this remains, it seems, an unpopular view amongst those who would lead us. Of course, it is an alien thought at the competition convention.
Commitments to enterprise and regional development would express concern for such prudence. Yet, so far, none rate more than a passing mention or a superficial acknowledgment in this campaign.Time to act
It's time to secure the future properly, particularly in rural and regional Australia. A first step is to acknowledge that the types and conditions of available capital are important. A second step is to enquire. A third step is to then do something.
The first step can be taken this week.
In particular, it seems our present financial system is unable to meet the needs of enterprise and regional development adequately. New types of institutions can complement existing arrangements, and strengthen the system overall.
For this reason, the call for an inquiry by Will Bailey deserves strong support.
It would be a good start, but the remedy needs more than just money. Businesses seeking to establish in regional areas find uncertain availability of needed labour. So they increasingly move to a bigger centre to manage risks. This will continue until there is commitment to regional development.
If competition is our only guide, the two-tier society will increasingly appear on the ground with the larger "have" towns and suburbs, and the "have-nots". The working poor will walk as the fashionably wealthy ride.
Australian governments have always had a role in providing other guides. These have been banks to suit particular needs, interventions to counter market dominance, support for the marginalised and the blighted, and sponsoring national innovations.
Australian governments have had the will in the past to act for the good of the country. That's what national leadership means to most people.