Effective Competition – pro what!

What is your politics can be a confronting question. It is getting more difficult to answer the question – What do you do? If you answer too honestly it might make the next question even more confronting: Are you a pro-market forces person or a pro-business person? Initially the difference may not be obvious. But, there is a world of difference if you want to influence a result. The reason is a result requires someone to intervene to give you an edge in the competition for a position in the market. Whereas to get an outcome you might support effective competition to ensure the benefits of what you offer to the market are maximised.

As does happen when you start talking about something, along comes a story that illustrated the point very well, and being it is a political story relevant to today, it is worth making a reference to it: The message relates to whether we will we see more rent-seeking or less under Abbott, more of what The Economist magazine calls “crony capitalism”? Read more: http://www.canberratimes.com.au/comment/abbotts-choice-competition-v-cronies-20141019-1189dm.html#ixzz3GcjBa2XF

The opening lines being: “It’s still too soon to tell whether the Tony Abbott’s government is pro-market or pro-business, but so far the evidence for the latter stacks higher than that for the former.

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 make life easier for favoured businesses.”

Of course the background to this Canberra Times story is:

“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.”

This where we think it gets really interesting: The review on competition policy is being considered. It becomes even more important to understand whether you are a pro-market or pro-business person. When you support the innovation of ideas you need to know whether the IP is protected when you make available for the market. It is the point of where you commercialise and the particular area where sound competitive principles are most important. It is where the regulation of intellectual property, such as patents, copyright, trademarks and plant breeder rights is critical.

Note we said ‘regulation’ and this implies that a form of government intervention in the market is needed to limit competition with owners of the patents and so forth for a limited period. It’s a necessary response to prevent market failure. However, another problem exists also – how do you encourage continuous improvements to incentivise new knowledge and ideas that progress the benefits?

No easy answer is the response. Maybe just too hard!

The Canberra Times article goes on the say: ” 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 phony “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.”

There lies our point: Australians have been one of the great inventors in the world. Yet something holds us back from being successful on our own country – Is it fighting cronyism!

 

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