A month or so ago, The Political Sword
posed the question ‘What have the unions ever done for us?
’ The piece closed with a question:
. . .if there was nothing for the political right and employers to fear from the unions, why are the same groups still trying to neuter the unions’ ability to campaign and protect the perceived interests of their members in 2014 while ‘unions of employers’ are encouraged?
There are multiple answers to this question, some of which probably have some evidence behind them. One is that the union movement generally supports the Australian Labor Party — although some unions don’t, such as Together
, which is primarily the Queensland public servants’ union. Naturally the support of the ALP would lead to a financial contribution: the conventional wisdom is that if the funding from unions for the ALP is diminished, the political organisation is less capable of fighting an election.
This line of reasoning has some validity but begs the question: where do the Liberal and National Parties get their funding from? Legislation in most jurisdictions within Australia put a cap on the amount of money that can be given directly to any political party without the need for disclosure. The values vary and for the purposes of this discussion aren’t important.
So you have legislation passed by politicians that regulates the donations they are allowed to accept during the course of their political careers. In effect, we are allowing politicians to self-regulate the value of cash and in-kind support garnered from the community and while some of the donations are probably altruistic, we don’t know that. Self-regulation usually doesn’t end up well. To eliminate the claims of ‘[the other side] would do that’, ‘jobs for the boys’; ‘political favours’ and so on, lets look at some non-political examples of failed self-regulation that have affected us all.
The Global Financial Crisis occurred during the late 2000s. The US Securities and Exchange Commission (SEC) imposed a $550million fine and a requirement to amend its business practices on Goldman Sachs in 2010
to settle —
SEC charges that Goldman misled investors in a subprime mortgage product just as the U.S. housing market was starting to collapse.
For more information please go to the link above. The short version of the press release, however, is that Goldman Sachs (and others) packaged up sub-prime (having less than ideal security backing) domestic mortgages that did have insurance in the case of default, claimed the resultant securities were completely backed by adequate security and sold the ‘investments’ to others. There was a loss of confidence in the stock market towards the end of 2007 causing the employment rates and demand for houses in parts of the USA to fall. That also reduced the value of houses and the underlying mortgage security, while those that lost their jobs couldn’t afford to reduce the value owing on the now depressed security value of the mortgage. So the home owners began to default on their mortgages and the mortgage security holder then attempted to claim the shortfall on the mortgage insurer. The mortgages were insured but the insurers couldn’t fund the demand on their policies and were close to bankruptcy
until the US Government intervened.
The problem here was self-regulation. In the 1990’s, the Reagan Presidency had reduced the supervision of financial institutions in the USA. Staff of these institutions were ‘incentivised’ with large commissions if they made more money for the financial institution — leading them to take risks. The Reserve Bank of Australia’s response to the 2014 Financial System Enquiry
discusses the GFC and claims:
The global financial crisis revealed a number of shortcomings in policies and practices at financial institutions and at regulatory and supervisory agencies, particularly in north Atlantic countries. These shortcomings included: … insufficient financial institution holdings of high quality capital and inadequate management of liquidity risk; inadequacies in basic microprudential supervision, corporate governance and risk management practices; an under-appreciation of the scale and complexity of operations at large trading banks and other financial institutions — particularly those with activities in multiple jurisdictions — and the difficulty in resolving them when they failed; inadequate oversight of over-the-counter (OTC) derivatives markets; and insufficient visibility of the extent of interconnectedness among financial institutions, including between the regulated and shadow banking sectors, and across borders.
The report then discusses the domestic and international efforts to determine the issues as well as rectify them. Amongst the responses were increased prudential requirements, better regulation and better assessment of financial risk — in short, partial re-regulation of the financial markets.
Australia did suffer some fallout from the failure of self-regulation in the financial industry during the Global Financial Crisis, as the Halifax Bank of Scotland (HBOS) owned Bankwest at the time. The University of New South Wales discusses the failure of prudential requirements and the subsequent fallout across the banking sector
, the practices of Bankwest under HBOS, and the subsequent problems the Commonwealth Bank inherited when it purchased Bankwest subsequent to the GFC. Yet business finance brokers such as Mooney, Kiddle and Partners
, are still questioning the need for regulation in financial markets, arguing the case that the small and medium business lending sector is being affected by unnecessary regulation.
Early this year, someone in the office of Assistant Health Minister Fiona Nash, ordered a website that promoted healthy eating, through giving packaged food a ‘star rating’ between 1 and 5, to be pulled down soon after it ‘went live
’. The subsequent investigation discovered that the minister and her chief of staff were implicated in the action. Additionally, the chief of staff was married to the sole director of a firm representing a number of packaged (or ‘junk’) food manufacturers and he had worked for a multi-national packaged food manufacturer prior to his move to the public service. The Australian Consumers Association compared the ‘stars’ that would be awarded to cheese sticks, peanut butter and cracker biscuits
and found that the products of one of the multi-national packaged food companies (that had been attempting to discredit the system) did not compare well. The New South Wales Cancer Council has described a number of the methods that are used to circumvent the existing self-regulation of food advertising
. The Conversation
carried a report
in August 2013 entitled ‘Forget children, self-regulating ads only help the food industry’. In the report, Sandra Jones, a Professor and Director of the Centre for Health Initiatives at University of Wollongong writes:
Following advocacy by parent groups and NGOs (non-governmental organisations) regarding the extensive use of premiums to sell fast food to Australian children, the mandatory Children’s Television Standards
were revised in 2009 to clarify that an advertisement:
must not make reference to the premium in a way that is more than merely incidental to the reference to the advertised product or service.
A review of food and beverage advertisements
in five Australian cities over a two-month period in 2010 identified 619 breaches of the standards, including 120 breaches of this specific clause, and 332 breaches of the industry’s voluntary regulations.
Even ACMA (the body that attempts to regulate commercial media) has concerns
about how the packaged food industry self-regulates advertising on television. Regular watchers of ABCTV’s MediaWatch
would be aware of its frequent concern of the lack of real regulatory power that ACMA can wield
No doubt parents find the pestering from their children wanting the latest ‘incentive’ to purchase a particular packaged food product annoying. They do always have the right to say no. The industry demonstrates time and time again, however, that this sort of marketing does work, despite the claims of responsible self-regulation which is supposed to prevent it. Unfortunately the disregard for self-regulation and continual marketing of what is really food that is not healthy creates a number of problems later in life. On 13 October 2014, ABCTV’s ‘Four Corners
’ reported on the results of a community health program managed by the council for the City of Ararat in regional Victoria, called ‘Ararat Active City
’. The program came about primarily due to the Channel 10 ‘reality’ show ‘The Biggest Loser
’ making the claim that the town was the most obese town in Australia — and making a living by selling advertising surrounded by people suffering while attempting to lose weight. A lot of the stories of the participants from both the The Biggest Loser
and Four Corners
discussed their poor eating habits — from childhood.
Earlier this year Barry O’Farrell resigned as Premier of New South Wales when it was revealed at an ICAC enquiry that he accepted a gift of a bottle of Penfolds Grange from someone with connections to a firm that was attempting to win a Government contract
. While the punishment may be excessive for the ‘crime’, why would the ‘thank you’ note have been available three years later unless there was some expectation that the gift would result in favourable treatment? Not that Barry O’Farrell was the only politician caught up in the ICAC enquiry: Eddie Obeid in New South Wales and a few Queensland politicians were also ‘mentioned in dispatches’ — although O’Farrell seems to have lost the most. Politicians make the rules around donations to political causes then appear to fragrantly breach them.
Rob Oakeshott, former NSW and Federal Member of Parliament, writing in The Saturday Paper
is promoting a Royal Commission investigating political donations. He claims:
The real threat is within government itself. It is the increasing corruption of our public decision-making by influence gained through record levels of private donations. The only colour Australia needs to fear is the colour of money in its democracy. Chequebook decision-making is the silent killer of necessary reform.
Oakeshott suggests that the commission would need a period of years to properly investigate the structures used by political parties to funnel donations and writes:
We need a royal commission because the only other option is to trust “the system” to self-regulate. By leaving this long-overdue clean-up of the “corruption by donation” of Australian policy to the worst offenders — political party leadership and their respective head offices — we’ll simply fall for the same pea and thimble tricks that have added to the complexity of the current electoral laws. We’ll end up with a convoluted, short-term bag-of-trickery reform.
The claim is made that the two major political parties spend around $100 million per election and, as Oakeshott has been both in the ‘two party’ system and outside it as an independent, he probably has some evidence to support his claim. Any way you look at it, the donors of significant parts of the $100 million would probably expect some ‘return on the capital expenditure’ as demonstrated by the sudden reappearance of a thank you note some three years after it was written.
Despite the claims, it seems that self-regulation only benefits those who are supposed to be regulating themselves. Rob Oakeshott has an on-line petition to sign — available here
should you choose to do so — that requests the Governor-General commence a Royal Commission into political donations and how to introduce some rigour into the system to ensure that politicians serve all those who elect them, rather than unknown vested interests.
If self-regulation is a demonstrated failure in the financial markets and advertising of unhealthy food to our children, why do we believe that politicians have greater altruistic values? What do you think?