The rise of corporate power in Australia

  • The rise of corporate power in Australia
12.03.20
Dr Lindy Edwards

In 2012 the federal Treasurer Wayne Swan took the startling step of publicly declaring ‘the rising power of vested interests is undermining our equality and threatening our democracy’. He argued ‘a handful of vested interests that have pocketed a disproportionate share of the nation’s economic success now feel they have a right to shape Australia’s future to satisfy their own self-interest’.

At the time some were quick to dismiss it as the rhetorical posturing of a Labor government that had mishandled major reforms. But there are also good reasons to believe this may be a growing problem. Economic power has become much more concentrated over the last 30 years. The ACCC reports that the ASX top 100 companies’ share of GDP has increased from 27% in 1993 to 47% in 2015.

At the same time economic power has become more concentrated, it has also been mobilised politically like never before. Business lobbying was fragmented, haphazard and unprofessional in the 1980s, but now it is a recognised career with an estimated 5,000 professional lobbyists in Canberra.

We rely on governments to make rules that keep our most powerful corporate players in line, and protect us all from their overzealous excesses. But what if the corporates have so much political influence that our governments have started enabling rather than constraining them?

As part of a new study, I looked into the detail of what our Parliaments actually legislated in response to major scandals around corporate excess. The findings were concerning.

At the height of the supermarket price wars there were scandals around the major supermarkets’ treatment of farmers. Extraordinary stories of bullying and intimidation emerged.

Coles and Woolworths accounted for about 73% of the grocery market at the time, and acted as gatekeepers that determined whether their suppliers could access the consumer market. They wielded that power to squeeze their supply chains.

Farmers’ complaints ranged from the supermarkets retrospectively changing prices and values of orders after production began, to being required to pay for goods damaged, stolen or unsold in store; being forced to foot the costs for discounting, and advertising; and being required to pay additional premiums for access to prime shelf positions.

In one instance evidence emerged of the supermarkets grouping their suppliers by their level of vulnerability, and targeting the harshest demands at those with the least power to resist.

Amidst the furore there were calls for a Code of Conduct to regulate the sector. The farmers wanted a code that was written by government, that was compulsory, backed up with penalties and would be enforced by an ombudsman.

The government ended up opting for a voluntary code drafted by the supermarkets, which lacked penalties or ombudsman oversight. 

The government received an avalanche of independent advice, including from the Australian Competition and Consumer Commission, that the code would be ineffective in addressing the problems in the sector, but they proceeded anyway.

The farmers were not only facing the enormity of the supermarkets’ economic heft in the market, they were also up against the political power of these mega-corporations in the corridors of Parliament.

This turned out to be a common pattern when I looked at our ten most powerful companies clashes with government. The study examined our largest controversies with the big four banks, Coles and Woolworths, the mining companies, Newscorp and Telstra.

If the major corporates’ economic power is translating into political power, which is then enabling them to win laws that further entrench their economic dominance, then we have entered the dangerous Medici Cycle.

The Medici Cycle is when the economic and political power of elites become self-reinforcing. It is named for the family dynasty that dominated Italy for 300 years during the Renaissance.

The study found three of the five sectors examined showed evidence of being in a Medici Cycle, suggesting our democracy is sliding into an oligarchy.

These findings also have implications for explaining why the richest one per cent have benefitted disproportionately from economic growth since the 1980s. It explains why our wealthiest are effectively experiencing ‘returns to power’ that have enabled them to scrape the wealth out of the economy.

The common factor of the case studies was that our largest corporations all operated in sectors that were dominated by between one and four very large companies that towered over very long supply chains. A lot of the corporate strategy was focused on redistributing wealth along the chains, so the profits were realised in their own hands. 

The policy debates with government were also over laws and regulations that affected where the profits were realised in the supply chain. The fact they so often won these debates explained how political power was being combined with economic power to redistribute wealth to the most powerful.

We must continue to push for an Independent Commission Against Corruption with powers to investigate our federal government. As the Coalition government resists, we need to echo their own mantra back at them: ‘If you have nothing to hide you have nothing to fear’.

Dr Lindy Edwards is a senior lecturer in politics at the University of New South Wales and the author of ‘Corporate Power in Australia: Do the 1% rule?’ Monash University Press, 2020.

A version of this article was originally published by Australian Community Media.

 

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