In the Globe and Mail, MLI’s Brian Lee Crowley notes that the industries now under fire for poor customer service, airlines, telecom companies and financial services, have something else in common: they are “beneficiaries of more regulatory attention by government than almost any other businesses.” For the solution we might look Down Under. “If I wanted to write a pro-consumer Speech from the Throne, I would be thinking about the country to hold up as an object lesson in harnessing the power of vigorous competition, not heavy-handed regulation, to deliver benefits to ordinary people. That country is Australia,” writes Crowley.
Australia offers lessons for pro-consumer policies
Special to The Globe and Mail, Published Thursday, Sep. 19 2013, 7:00 PM EDT
Oh what a tangled web we weave when first we practise to regulate. Political strategists at the heart of the Harper government might repeat this mantra to themselves as they prepare the next Speech from the Throne.
The reason such a prudential reminder is necessary is the trial balloons now being floated in the media about the centrepiece of the Speech, which traditionally announces the key parts of the government’s legislative plans.
High on the list is an alleged scheme to put the focus on consumer outrage over poor service, high prices and sharp practice by a number of industries, namely airlines, telecoms and financial services. Proposals will be forthcoming for government controls and regulations, like airline passenger bills of rights, capped roaming charges for mobile phones and a new code to protect consumers of financial services.
The observant, however, will have noticed something that unites all of these industries beyond their unpopularity with consumers. They are already the beneficiaries of more regulatory attention by government than almost any other businesses.
Banks have regulators hanging from the rafters. We just went through a big bust-up between the government and the telcos over Ottawa’s plans to rig spectrum auctions in favour of new entrants to the Canadian market.
All three of these sectors labour under one of the biggest regulatory handicaps of all: Foreign ownership rules that prevent non-Canadians from taking control, even when such foreign control might result in more vigorous competition, give access to new and better technology and capital investment, and give more protection to consumers through real choice. I personally don’t care whether my mobile telephone company is owned by Mongolians, Turks or Mexicans. I do care about getting a quality service at a competitive price. And since competition is always more effective at delivering these benefits to consumers than regulation, a government that cared about consumers would not be looking to add further to a regulatory burden that already adds to costs, stifles innovation and harms productivity.
This isn’t just Adam Smith’s theory about the invisible hand, by the way (although I think Smith had all the essentials right). If I wanted to write a pro-consumer Speech from the Throne, I would be thinking about the country to hold up as an object lesson in harnessing the power of vigorous competition, not heavy-handed regulation, to deliver benefits to ordinary people. That country is Australia.
Australia’s old economic model of heavy regulation and protected markets had pretty much run out of steam by the 1980s. A new cross-party consensus emerged that Australia’s only hope was to reinvigorate the economy by tearing down regulatory barriers and pursuing a single-minded policy of injecting genuine competition into previously protected industries.
The results have been remarkable. Australia has enjoyed 22 years of uninterrupted growth in GDP, employment and wages, with no end in sight. Goldman Sachs says there is no better than a 20-per-cent chance that the country’s unbroken streak of growth years will end in a recession.
No two countries are alike, of course, and one might argue that Australia’s case is unique, or due to unusual circumstances not relevant to Canada, but that seems unlikely. Australia and Canada have enough characteristics in common (parliamentary government, colonial history, stable politics and institutions, natural resource wealth, export markets shifting from the U.S. to Asia) that our two countries traditionally look closely at each others’ experiments to see how applicable they might be.
Australia’s change of economic course wasn’t merely some effort to beef up their equivalent of the Competition Bureau. It was a concerted effort to identify and root out barriers to open competition in every industry in every part of the country, including in politically sensitive areas like supply management. Competition was promoted, not for its own sake, but precisely for the benefits it generated for consumers, who enjoyed lower prices, more choice and a more efficient economy that in turn generated lots of jobs. That last part was vital, as the new employment in efficient parts of the economy quickly soaked up the workers whose jobs in the old protected industries fell by the wayside. It was this relentless pressure to sweep away old barriers and restrictive practices that made consumers better off and raised Australians’ standard of living, not a bunch of interfering bureaucrats armed with gimmicky consumer bills of rights.
If Ottawa wants to build a fire under industries that consumers feel aren’t delivering while raising living standards, it should take a leaf from Canberra’s book and build a national consensus around sweeping away regulatory and other barriers to competition.
Now if we could just import their weather too.
Brian Lee Crowley is managing director of the Macdonald-Laurier Institute.