Contrary to conventional economic theory since the time of Thales, who cornered the market for olive presses in western Anatolia in the sixth century BC, another Australian government is poised to transform a competitive market into a monopoly.
No, it is not the privatisation of the Royal Australian Mint, or the spin-off of the corporate watchdog’s company register, which are both in train. Plopping the latter trove of public information into the hands of a private monopoly should ensure that the public pays even more for its own information (which it paid for in the first place anyway).
We are talking about boats.
Commuters on the northern beaches of Sydney have been enjoying two fast ferry services operating between Manly and Circular Quay in recent years. These have been both efficient and low-cost.
Now, however, a tender is looming to deliver the concession to a single operator. The state will not say how much it might get for selling this asset, but it insists it will be good for consumers.
Some may question how scrapping competition and bestowing a monopoly upon one operator could possibly be good for consumers. Not this correspondent.
We now know that our overlords have embraced an economic theory so radical, so visionary, that nobody else has thought of it yet.
Until now, traditional economics has had it that competition encourages businesses to compete for customers. There are two ways in which they compete: quality and price.
And right now, there is quality of service by the two fast ferry operators at a decent price. So why bust up something that works?
“Offering the service to one operator will give that operator the certainty needed to be able to invest in the service and deliver better results for customers,” says Transport for NSW.
As explained to another citizen who inquired: “We want a better outcome for customers. As an example, all customers will use the main wharf at Manly which is sheltered from the elements.”
This is a compelling argument. Natural phenomena such as the weather are factors far too often ignored by the imperfect science of economics. In the event of a tsunami sweeping through Sydney Heads on a north-westerly trajectory, it is quite plausible that customers may be better off taking the bus. This may also be the case during a blizzard, or if the earth was being bombarded by fiery meteors.
“The tender process is set up with the customer at the forefront of our minds,” says the government. “The new operator will be required to provide a minimum level of service that is at least equal to the combined service levels of both of the current operators.”
The state appears to have gleaned inspiration from its federal government peers who have a penchant for delivering their citizens’ belongings into the warm embrace of monopoly operators.
Sydney Airport for instance, again named the worst airport by the Australian Competition and Consumer Commission this year, also enjoys the first right of refusal over Sydney’s second airport. A double monopoly with cream.
To be fair, Sydney Airport has delivered a handsome return for some taxpayers; those who are also directors of corporate entities in low-lying Caribbean islands, own shares in the airport trust and do not have to pay tax.
As for the incessant complaints, service levels at Mascot are at least on par with Toncontin International Airport in Tegucigalpa, Honduras, and prices differ marginally from those you might find in, say, Oslo.
So there is fine precedent. Victoria too has its fair share of privatised monopolies, but what is the philosophy? Monopolies are roundly thought to countervail traditional economics and even common sense.
If we look to select African dictatorships, we can find the state awarding special concessions to favoured tenderers. Before the reforms in Bolivia, it was also common practice to provide some entrepreneurs “the certainty needed to be able to invest in the service and deliver better results for customers”.
Elements of feudalism underpin this. Stretching back only one millennium, it was de rigueur for political overlords to award special privileges to chosen commercial fiefdoms based on the assumption that they would do the right thing by their vassals. And our neo-feudal approach certainly conforms with the recent declaration by the Commonwealth to reinstitute knights and dames.
Yet the theory is more sophisticated than this. There are strong elements of the type of state monopoly capitalism espoused by Karl Marx, whose doctrine predicted laissez-faire capitalism would give way to monopoly capitalism wherein the state would intervene to protect large monopolistic enterprises from the ravages of competition by smaller firms. Look no further than the Australian Securities Exchange (ASX).
Those who would cry that the state should be busting monopolies, not creating them, fail to understand the benefits conferred by this neo-feudalo-Marxian doctrine. Why do we prop up the banks? System stability. Further, this counter-efficient allocation of resources theory eliminates the scourge of corporate collusion.
If there is only one of you, you are hardly going to collude, except perhaps cerebrally via the intercourse between the left and right sides of your brain.
There are other benefits. This avant-garde policy has enabled us to coin a neologism, even to augment the word that was once the longest in the English language. Our pro-monopoly initiatives can be said to be of the school of pre-antidisestablishmentarian economic theory.